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Errata 

Page  19,  Section  61.     After  the  transaction  of  May  4,  insert  the 
following: 

May  4.     Sold  to  B.  F.  Parker,   on  account,   50  yds.  Empress  cloth 
at  $1.35. 

Page  33.     The  transaction  of  May  18  should  read: 

Bought  from  Marshall  Field  &  Co.,  400  yds.  Silk  Organdie  at  22c. 

Page  90.     After  the   transaction  of  September  5,  insert  the  fol- 
lowing: 

September  6.     Bought  from  C.  R.  Langley,  on  account,  merchandise 
valued  at  $Sf>7. 


AN  INTRODUCTORY  COURSE 

S 

LOC  KYEAR' 

BOOKKEEPING 

By 

M.   H.   LOCKYEAR 

President  (1909-10)  National  Commercial  Teachers'  Federation 
President  (1907-08)  National  Business  Teachers'  Association 

Script  I /lustrations 

By 

F.    B.   COURTNEY 

THE  GREGG  PUBLISHING  COMPANY 

NEW  YORK                                                    CHICAGO 

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THE  evolution  through  which  the  office 
methods  of  this  country  are  passing  is 
recognized  by  the  leading  publishers  of  text- 
books and  requires  constant  change  in  our 
methods  of  teaching.  There  is  a  tendency 
to  force  upon  the  schools  bookkeeping  texts 
which  are  too  advanced  for  beginners.  Busi- 
ness teachers  should  insist  on  texts  which 
furnish  a  thorough  training  in  the  principles 
of  bookkeeping  and  which  lay  a  firm  and 
solid  foundation  in  the  elementary  principles 
before  taking  up  matters  which  properly  be- 
long to  advanced  bookkeeping.  When  the 
foundations  are  secure,  a  limited  amount  of 
advanced  bookkeeping  may  be  added  to  the 
course,  but  this  should  be  of  secondary  im- 
portance. _M    IL  LOCKYEAR. 

In  his  Address  as 

President  of  the  National  Business 

Tearr.ers'  Association.  1908. 


Copyright.  1907.  by  M.  H.  Lockyear. 
Copyright,  1911.  by  The  Gregg  Publishing  Company. 


CONTENTS 


PACK 

First  Lesson 

The  Object  of  Bookkeeping 1 

The  Cash  Account 2 

Fruit  and  Confectionery  Transactions 4 

Second  Lesson 

The  Merchandise  Account 6 

Merchandise  Account  with  Inventory 7 

Coal  and  Wood  Transactions 9 

Third  Lesson 

Double  Entry  Bookkeeping.  .• 11 

Dress  Goods  Transactions 13 

Statement   Introduced 13 

Fourth  Lesson 

Personal  Account  Showing  a  Resource 15 

Personal  Account  Showing  a  Liability 16 

Grocery  Transactions 18 

Fifth  Lesson 

Cash,  Merchandise,  Personal,  and  Proprietor's  Stock  Account 19 

The  Trial  Balance 20 

The  Complete  Statement 22 

Dry  Goods  Transactions 23 

Sixth  Lesson 

Bills  Receivable  Account 25 

Bills  Payable  Account 28 

Seventh  Lesson 

The  Expense  Account 31 

Dry  Goods  Transactions 32 

Rules  of  Debit  and  Credit 35 

Eighth  Lesson 

The  Proprietor's  Investment  Account 37 

Partnership  Accounts 39 

Interest  and  Discount  Account 41 

Rules  of  Debit  and  Credit 43 


314609 


CONTENTS— Continued 

PAGE 

Ninth  Lesson 

Interest  Bearing  Notes 44 

Compound  Entries 46 

Seed  and  Grain  Transactions 49 

Tenth  Lesson 

Exercise  in  Closing  the  Ledger 51 

Classification  of  Accounts 53 

Closing  the  Ledger 53 

The  Second  Trial  Balance 56 

Eleventh  Lesson 

The  Journal .  57 

Posting   60 

Exercise  in  Journalizing 62 

Twelfth  Lesson 

The  Cash  Book 65 

Posting  from  the  Cash  Book 68 

Jewelry  Transactions 69 

Thirteenth  Lesson 

The  Sales  Book 70 

The  Purchase  Book 72 

Carpet  and  Furniture  Transactions 73 

Fourteenth  Lesson 

The  Cash  Journal 77 

Special  Column  Books 81 

Controlling  Accounts 81 

Tea  and  Coffee  Transactions 83 

Fifteenth  Lesson 

Shipment  and  Consignment  Accounts 87 

Commission  Transactions : 90 

Rules  of  Debit  and  Credit 91 

Opening  Entries 92 

Merchandise  Discount 93 

Sixteenth  Lesson 

Maturity  of  Notes 96 

Discounting  Promissory  Notes 97 

Drafts  and  Their  Use 99 

General  Review  Exercise 101 

Hardware  Transactions 103 

iv 


First  Lesson 


The  Cash  Account 

1.  Bookkeeping  is  a  systematic  method  of  recording  business  transactions. 

2.  The  object  of  bookkeeping,  or  account  keeping,  is  to  furnish  the  proprietor 
with  information  about  the  business  which  will  enable  him  to  determine  at  any 
time  who  is  owing  him  money  and  to  whom  he  is  indebted,  the  amount  of  property 
bought  and  sold,  the  expenditures  and  income  of  the  business,  cash  on  hand,  and 
many  other  details  of  importance  in  the  successful  management  of  any  enterprise. 

3.  As  the  results  shown  by  a  set  of  books  are  obtained  from  the  various 
accounts,  it  follows  that  the  first  step  in  learning  bookkeeping  is  to  study  the  form 
and  purpose  of  accounts.  The  form,  or  manner,  of  keeping  all  accounts  is  practi- 
cally the  same ;  but  each  has  a  purpose  distinctly  its  own. 

4.  An  account  is  a  collection  of  debits  and  credits,  under  an  appropriate  title, 
relating  to  the  same  person  or  thing. 

5.  Accounts  are  kept  in  a  book  called  the  ledger,  and  it  is  necessary  for  you 
to  study  carefully  the  form  of  this  book.  The  following  illustration  shows  the 
form  of  the  standard  ledger  account : 

Form  of  Ledger  Account 


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Illustration  No.  1 


Observe  that  the  account  is  divided  in  the  center  by  the  three-line  ruling  into 
two  equal  parts,  similarly  ruled,  the  left  half  being  the  debit  side  and  the  right  half 
the  credit  side. 

6.  Reading  the  columns  of  the  left  half  of  the  account  from  left  to  right, 
notice  that  the  first  two  are  used  for  the  month  and  day ;  the  third  is  for  explana- 
tions of  the  various  transactions;  the  fourth  is  the  folio  column;  while  the  fifth, 
which  includes  the  space  between  the  two-line  ruling  and  the  three-line  ruling,  is 

1 


2  LOCKYEAR'S  .BOOKKEEPING 

the  money  column.     Notice  that  it  has  a  place  for  dollars  and  a  place  for  cents. 
The  uses  of  the  explanation  column  and  the  folio  column  will  be  explained  later. 

7.  By  the  term  cash  we  mean  everything  that  is  considered  as  money ;  such 
as  gold,  silver  and  coins,  paper  money  of  all  kinds,  bank  drafts,  checks,  express 
and  postofhce  money  orders,  etc. 

8.  A  business  transaction  is  an  exchange  of  value  between  persons.  Study 
the  method  of  entering  these  cash  transactions  in  the  model  Cash  account  on  this 
page. 

Transactions  Illustrating  Cash  Account 

June     1     Amount  of  cash  on  hand $1,200.00 

June    2     Paid  cash  for  rent  of  warehouse  for  1  month 20.00 

June     3     Paid  cash  for  invoice  of  goods  bought  from  R.  P.  Sloan 255.00 

June    3     Paid  cash  for  merchandise 7.92 

June    4     Sold  merchandise  for  cash 180.00 

June    4     Received  cash  for  sale  to  A.  G.  Link 2.96 

June    6     Paid  cash  for  merchandise 105.41 

June     7     Received  cash  for  merchandise 138.00 

June    7     Paid  James  Kinney  one  week's  wages 8.00 

June    8     Gave  O.  R.  Johnson  check  for  merchandise 13.44 

June    9     Paid  for  repairs 3.75 

June  10     Received  check  for  merchandise 5.40 

June  10     Sold  for  cash  bill  of  goods  amounting  to 44.00 

June  13     Paid  cash  for  merchandise 230.85 

June  14     Bought  a  horse  and  wagon  for  cash 175.00 


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Illustration  No.  2 


LOCKYEAR'S    BOOKKEEPING  3 

9.  Deductions  made  from  the  foregoing  transactions: 

(a)  When   cash  is  received  the  amount  is  entered  on  the  left  or 

debit  side. 

(b)  When  cash  is  paid  out  the  amount  is  entered  on  the  right  or 

credit  side. 

(c)  The  balance  of  the  cash  on  hand  is  the  sum  of  the  receipts,  plus 

the  amount  on  hand  at  the  beginning  of  business,  if  there  is 
such  an  amount,  minus  the  sum  of  the  payments. 
(d)     The  balance  of  cash  as  shown  by  the  Cash  account  must  agree 
with  the  cash  actually  on  hand. 

10.  To  balance  the  Cash  account : 

(a)  Write  the  balance  in  red  ink  on  the  credit  side. 

(b)  Close  the  money  columns  with  single  red  lines  as  shown  in  the 

illustration. 

(c)  Write  the  footings  immediately  under  the  red  lines. 

(d)  Immediately   under   the    footings   and   across  the   date   column 

draw  two-line  rulings  as  shown  in  the  illustration. 

(e)  Transfer  the  balance  to  the  debit  side  below  the  double  rulings. 

Note:     You  will  observe  that  the  red  ink  rulings  on  opposite  sides  of  the  account  are 
on  the  same  line. 

11.  It  is  important  that  you  learn  at  this  time  how  to  balance  an  account. 
You  are  therefore  urged  to  make  a  very  careful  study  of  the  above  steps  in  con- 
nection with  the  foregoing  account. 

It  is  very  important  that  you  realize  now,  at  the  beginning  of  this  study,  the 
necessity  for  doing  neat,  accurate  work.  The  ability  to  perform  good  mechanical 
work  is  just  as  necessary  as  a  thorough  knowledge  of  the  theory  of  bookkeeping. 
Your  aim  at  all  times  should  be  to  have  your  work  in  the  best  possible  form. 
The  utmost  care  must  be  taken  with  the  writing,  figures,  ruling,  etc. 

Exercise  No.  1 

12.  Prepare  a  Cash  account  from  the  following  transactions  on  a  sheet  of 
ledger  paper  which  you  will  find  among  your  supplies.  When  the  exercise  is  com- 
pleted, hand  it  to  your  teacher  for  approval. 

Cash  Transactions 

July  1  Amount  of  cash  on  hand $  300.00 

July  2  Paid  store  rent  for  one  month 40.00 

July  2  Bought  merchandise 12.35 

July  3  Received  cash  for  merchandise   10.00 


4  LOCKYEAR'S    BOOKKEEPING 

July     5     Paid  for  repairs  1.85 

July    7     Sold  merchandise   for  cash 13.60 

July     9     Gave  my  check  to  J.  M.  French  for  merchandise , 25.00 

July    9     Paid  James  Harter  one  week's  wages 9.50 

July  1 1     Received  cash  for  merchandise 18.00 

July  15     Paid  cash   for  merchandise 17.45 

July  15     Sold  for  cash  merchandise  amounting  to 20.00 

Balance  the  account,  following  the  steps  set  out  above,  and  bring  the  balance 
clown  below  the  ruling  as  shown  in  the  previous  illustration. 

Continue  the  account  immediately  below  the  ruled  lines  with  the  following 
transactions : 

July  16    Received  check  from  J.  C.  King  for  merchandise 19.00 

July  16     Paid  James  Harter  one  week's  wages 9.50 

July  18     Sold  merchandise  for  cash 31.45 

July  19     Paid  cash  for  merchandise  amounting  to 5.46 

July  20     Paid  express  charges  on  above 1.35 

July  22     Bought  for  cash  invoice  of  goods  from  C.  K.  Billings 37.25 

July  23     Paid  James  Harter  one  week's  wages 9.50 

July  24     Bought  merchandise  for  cash 41 .40 

July  24    Received  cash  for  merchandise 36.00 

Balance  and  rule  the  account. 

Exercise  No.  2 

13.  To  be  able  to  do  neat  ruling  requires  practice.  For  this  exercise  you 
will  rule  a  ledger  account  on  a  sheet  of  blank  paper.  Rule  the  account  as  shown 
in  Illustration  No.   1. 

Prepare  a  Cash  account   from  the  transactions  given  below.     Always  put 

forth  your  best  efforts  in  the  preparation  of  these  exercises.  Neatness  and  accu- 
racy are  essential  qualities  of  a  bookkeeper. 

Fruit  and  Confectionery  Transactions 

Jan.     1     Amount  of  cash  on  hand   $  150.00 

Jan.     1     Bought    one    box    Fiorina    oranges 1.80 

Jan.     2     Bought  10  bunches  bananas  at  $1.40 14.00 

Jan.     2    Received  cash  for  3  bunches  bananas  at  $1.60 , 4.80 

Jan.    4     Paid  cash  for  80  lbs.  candy  at  22c 17.60 

Jan.     5     Sold  2  boxes  oranges  at  $2.00 4.00 

Jan.     5     Sold  2  bunches  bananas  at  $1.35 2.70 

Jan.     6     Sold  40  lbs.   candy   at   30c 12.00 

Jan.     7     Paid    for    repairs 2.35 

Jan.     7     Paid  cash  for  12  boxes  oranges  at  $2.00 24.00 

Jan.     7     Received  cash  for  4  boxes  oranges  at  $2.50 10.00 

Jan.     8     Received  cash  for  3  bunches  bananas  at  $1.75 5.25 


LOCKYEAR'S    BOOKKEEPING  5 

Balance  the  account  as  previously  instructed.     Bring  the  balance  below  the 
ruling  and  continue  the  account. 

Jan.  9  Paid  cash  for  200  pounds  candy  at  30c $  60.00 

Jan.  9  Received   cash   for   5   boxes   oranges   at  $1.90 9.50 

Jan.  11  Received  cash  for  75  pounds  candy  at  38c 28.50 

Jan.  11  Paid    store    rent 10.00 

Jan.  12  Sold  80  pounds  candy  at  36c 28.80 

Jan.  13  Paid    for    fixtures 13.45 

Jan.  13  Sold   2   boxes   oranges    at   $2.25 4.50 

Jan.  14  Sold  40  pounds  candy  at  40c 16.00 

Jan.  15  Sold   1   box  oranges    2.30 

Jan.  15  Paid  cash  for  10  boxes  lemons  at  $1.80 18.00 

Jan.  16  Received  cash  for  2  boxes  lemons  at  $2.25 4.50 

Jan.  18  Received  cash  for  3  boxes  lemons  at  $2.30 6.90 

Jan.  19  Received  cash  for  10  pounds  candy  at  45c 4.50 

Balance  the  account  as  previously  instructed,  and  hand  it  to  your  teacher. 

14.     Answer  the  following  questions  in  writing  and  hand  to  your  teacher : 

(a)  What  items  are  considered  cash? 

(b)  Write  the  rule  for  debiting  and  crediting  cash. 

(c)  What  is  the  purpose  of  the  Cash  account? 

(d)  How  is  the  balance  of  cash  ascertained? 

(e)  State  the  steps  in  closing  the  Cash  account. 

(/)     What  is  the  method  of  testing  the  Cash  account? 
(g)     When  an  account  is  balanced  and  continued,  why  is  the  balance 
brought  below  the  ruling? 


Second  Lesson 


The  Merchandise  Account 

15.  The  term  Merchandise  includes  all  movable  property  which  is  bought 
and  sold  for  the  purpose  of  gain.  Merchandise  is  the  principal  source  of  profit 
in  a  trading  concern. 

16.  The  chief  purpose  of  this  account  is  to  show  the  gain  or  loss  on  mer- 
chandise handled  by  the  dealer. 

17.  The  following  illustration  shows  the  purpose  for  which  the  Merchandise 
account  is  kept  and  the  manner  of  keeping  it.  Read  the  transactions  and  observe 
carefully  how  each  is  entered. 

Transactions  Illustrating  Merchandise  Account 

May  2  Bought  from  the  Diamond  Coal  Co.,  12  T.  coal  at  $1.90 $22.80 

May  3  Sold  2  T.  coal  for  cash  at  $2.50 5.00 

May  3  Bought  for  cash  from  the  Chandler  Coal  Co.,  4  T.  coal  at  $2.00 8.00 

May  4  Sold  3  T.  coal  at  $2.75 8.25 

May  5  Sold  6  T.  coal  at  $2.60  for  cash 15.60 

May  6  Bought  of  the  Ingle  Coal  Co..  7  T.  coal  at  $1.75 12.25 

May  6  Sold  for  cash  6  T.  coal  at  $2.80 16.80 

May  6  Sold  2  T.  coal  at  $2.40 4.80 

May  8  Bought  from  Woolley  Coal  Co.,  14  T.  coal  at  $2.00 28.00 

May  8  Sold   for  cash  7  T.  coal   at  $2.60 18.20 

May  9  Sold  5  T.  coal  at  $2.65 13.25 

May  10  Sold  for  cash  6  T.  coal  at  $2.60 15.60 


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LOCKYEAR'S    BOOKKEEPING  7 

18.  Observe  the  following: 

How  many  tons  of  coal  were  bought? 
How  many  tons  were  sold? 
Find  the  gain. 

19.  Deductions  made  from  the  foregoing  transactions : 

(a)  The  account  is  debited  for  all  merchandise  bought. 

(b)  The  account  is  credited  for  all  merchandise  sold. 

(c)  The  amount  of  gain  or  loss  is  the  difference  between  the  two 

sides  of  the  account — a  gain  if  there  be  a  credit  excess,  a  loss 
if  there  be  a  debit  excess. 

20.  When  the  Merchandise  account  shows  a  gain,  it  is  closed  by  writing  on 
the  debit  side,  in  red  ink,  the  word  "Gain"  and  the  amount  thereof.  Illustra- 
tion No.  3  shows  the  manner  of  closing  the  Merchandise  account  when  all  goods 
have  been  sold  and  there  is  a  gain. 

21.  If  the  coal  had  been  sold  for  less  than  cost,  the  credit  side  of  the  account 
would  be  the  smaller.  In  that  case  you  would  close  the  account  by  writing  on 
the  credit  side  in  red  ink  the  date  and  the  amount  of  the  loss. 

22.  Notice  that  the  balancing  amount,  which  would  be  the  loss  or  the  gain, 
is  not  carried  below  the  double  rulings.  Its  disposition  will  be  explained  in  an- 
other lesson. 

Merchandise  Inventory,  Freight  and  Drayage 

23.  The  purpose  of  the  Merchandise  account  is  to  show  the  cost  of  goods 
purchased  and  the  returns  from  sales,  in  order  to  ascertain  the  gain  or  loss  on 
trading.  The  original  cost  of  the  goods  is  not  the  only  item  that  must  be  con- 
sidered. There  are  incidental  charges  such  as  freight,  drayage,  expressage,  etc., 
which  increase  the  cost  of  the  goods.  These  charges  are  often  debited  direct  to 
the  Merchandise  account.  If  it  is  desired  to  know  the  exact  amount  paid  for 
these  additional  charges,  a  separate  account  may  be  opened  in  the  ledger  for  each. 
When  this  is  done,  these  accounts  should  be  transferred  to  the  Merchandise 
account  at  the  time  of  closing  the  books. 

24.  Merchandise  Account  with  Freight  and  Drayage  Charges  and  an 
Inventory.  In  the  following  exercise  you  will  enter  freight,  drayage,  ex- 
pressage,   etc.,   in    the    Merchandise    account. 

Merchandise  Account  with  Inventory 

May  11     Bought  of  John  Archibold  Coal  Co..  8  T.  coal  at  $1.70 $13.60 

May  11     Paid  freight  on  above 2.00 

May  12     Sold  4  T.  coal  for  cash  at  $3.00 12.00 


8  LOCKYEAR'S    BOOKKEEPING 

May  13     Sold  2  T.  coal  on  account  at  $2.90 5.80 

May  13     Bought  10  T.  coal  from  Green  River  Coal  Co.  for  cash  at  $1.75 17.50 

May  13     Paid  freight  on  above 2.25 

May  14     Sold  8  T.  coal  for  cash  at  $3.10 24.80 

May  14     Paid  for  hauling   1.00 

May  16     Bought  from  the  S.  W.  Little  Coal  Co.,  for  cash,  16  T.  coal  at  $2.00 32.00 

May  17     Sold  on  account  9  T.  coal  at  $3.25 29.25 

May  18     Sold  for  cash  2  T.  coal  at  $3.25 6.50 


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Illustration  No.  4 

Note:     The  above   illustration   shows   the   account   when    not   written   at   the   top   of   the 
ledger  page. 

25.  Observe  the  following: 

How  many  tons  of  coal  were  bought?  How  much  was  paid  for  it?  What 
was  the  total  cost?  How  many  tons  were  sold?  How  much  was  received 
for  it?  How  many  tons  are  on  hand?  If  the  coal  on  hand  should  be  sold  at  cost, 
$2.00  per  ton,  what  would  be  the  amount  of  profit  on  the  coal  already  sold? 

26.  A  merchandise  inventory  is  a  schedule  of  goods  on  hand ;  the  value 
being  usually  computed  at  cost  price. 

27.  In  order  to  determine  the  gain  or  loss  on  merchandise  sold,  it  is  neces- 
sary to  take  into  account  the  inventory  (the  unsold  goods)  which  in  the  above 
illustration  is  nine  tons.  It  is  assumed  that  this  amount  is  sold  for  $2.00  a  ton, 
which  is  the  original  cost.  Adding  the  inventory  value,  $18.00,  to  the  credit  side 
of  the  Merchandise  account  is  equal  to  selling  the  goods  at  cost.  Now,  the  dif- 
ference between  the  two  sides  of  the  account  will  show  the  gain  or  loss  on  the 
merchandise  actually  sold. 


LOCK  YEAR'S    BOOKKEEPING  9 

Another  explanation  for  entering  the  inventory  at  cost  on  the  credit  side  is 
that  this  amount  offsets  an  equal  amount  entered  on  the  debit  side  of  the  account 
when  the  goods  were  purchased,  and  thus  the  remaining  entries  in  the  account 
represent  the  cost  and  returns  of  the  goods  disposed  of. 

28.  In  closing  the  Merchandise  account  the  inventory  is  brought  down  on 
the  debit  side  under  the  double  rulings.  The  account  then  shows  the  value  of 
the  goods  on  hand  at  that  time.  Subsequent  purchases  will  be  entered  on  the 
debit  side  of  the  account  as  before. 


Exercise  No.  3 

29.  Prepare  a  Merchandise  account  from  the  following  transactions,  using 
a  sheet  of  ledger  paper,  and  hand  to  your  teacher.  Assume  that  you  are  dealing 
in  coal  and  wood. 

Coal  and  Wood  Transactions 

June  1  Buy  from  National  Coal  Co.,  on  account,  8  T.  coal  at  $1.70 $13.60 

June  2  Buy  from  Helfrich  Lumber  Co.,  for  cash,  10  cds.  wood  at  $1.25 12.50 

June  2  Sell  at  retail,  for  cash,  4  T.  coal  at  $2.60 10.40 

June  3  Buy  12  T.  coal  from  St.  Bernard  Coal  Co.,  on  account,  at  $1.75 21.00 

June  3  Pay  freight  on  the  above 4.00 

June  3  Sell  at  retail,  for  cash,  6  cds.  wood  at  $2.25 13.50 

June  3  Pay  yard  rent 3.00 

June  4  Buy  from  John  A.  Reitz  &  Sons,  for  cash,  15  cds.  wood  at  $1.10 16.50 

June  4  Sell  at  retail,  for  cash,  7  cds.  wood  at  $2.50 17.50 

June  4  Sell  at  retail,  for  cash,  4  T.  coal  at  $3.00 12.00 

June  6  Pay  cash  for  hauling  wood 2.00 

June  6  Sell  at  retail,  on  account,  2  T.  coal  at  $2.90 5.80 

June  6  Sell  at  retail,  for  cash,  3  cds.  wood  at  $2.85 8.55 

June  7  Pay  for  repairs  on  shed 1.50 

June  7  Buy  from  St.  Bernard  Coal  Co.,  on  your  note,  10  T.  coal  at  $1.80 18.00 

June  7  Sell  at  retail,  for  cash,  4  T.  coal  at  $3.10 12.40 

June  8  Sell  at  retail,  for  cash,  4  cds.  wood  at  $2.50 10.00 

June  9  Sell  at  retail,  for  cash,  6  T.  coal  at  $3.50 21.00 

June  9  Sell  at  retail,  for  cash,  2  cds.  wood  at  $2.75 5.50 

June  10  Buy  from  the  Helfrich  Lumber  Co.,  for  cash,  12  cds.  wood  at  $1.20 14.40 

June  11  Sell  at  retail,  for  cash,  5  cds.  wood  at  $2.60 13.00 

30.  When  the  account  is  completed  carry  out  the  following  instructions : 

(a)  Find  the  cost  of  the  coal  and  the  wood. 

(b)  Find  the  total  expense  incurred  in  running  the  business. 

(c)  Find  the  amount  for  which  the  coal  and  the  wood  were  sold. 

(d)  Find  the  number  of  tons  of  coal  and  the  number  of  cords  of 

wood  on  hand. 


10  LOCKYEAR'S  BOOKKEEPING 

(e)     Inventory  the  coal  on  hand  at  $1.85  per  ton,  and  the  wood  on 

hand  at  $1.20  per  cord. 
(/)      From  these  facts  find  the  amount  of  gain  or  loss. 
(g)     Close  the  account  as  shown  in  Illustration  No.  3. 

Exercise  No.  4 

31.  Take  a  sheet  of  ledger  paper,  rule  it  in  ledger  form,  and  prepare  a 
Merchandise  account  from  the  transactions  given  below.  When  completed  hand 
to  your  teacher.  Do  not  lose  sight  of  the  important  fact  that  clean,  accurate  work 
is  imperative.     Let  this  work  represent  your  best  efforts. 

Fruit  Transactions 

June  1     Buy  15  bunches  bananas  at  $1.25 $18.75 

June  1     Buy  10  boxes  oranges  at  $1.80 18.00 

June  2     Sell  2  bunches  bananas  at  $1.80 3.60 

June  2     Buy   8   boxes   lemons    at   $1.90 15.20 

June  2     Sell  3  boxes  oranges  at  $2.60 7.80 

June  3     Sell  3  boxes  lemons  at  $2.70 8.10 

June  3     Pay  rent 6.00 

June  3     Sell  6  bunches  bananas  at  $1.90 11.40 

June  4    Sell    4    boxes    oranges    at    $2.90 11.60 

June  4     Pay    freight    bills    2.30 

June  4     Buy  15  bunches  bananas  at  $1.15 17.25 

June  4  Pay   cash   for   drayage    50 

June  4     Sell  2  boxes  lemons  at  $2.90 5.80 

June  6     Buy  15  boxes  lemons  at  $1.60 24.00 

June  6    Pay  freight  bills  1.80 

June  7     Sell  6  boxes  lemons  at  $2.75 16.50 

June  7     Sell  7  bunches  bananas  at  $2.00 14.00 

June  8     Sell  8  bunches  bananas  at  $1 .85 14  80 

June  8     Sell  4  boxes  lemons  at  $2.80 11.20 

32.  Inventory  the  bananas  on  hand  at  $1.25  per  bunch ;  the  oranges  at  $1.80 
per  box;  and  the  lemons  at  $1.75.  Close  the  account  as  shown  in  Illustration 
No.  4. 

33.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher: 

(a)  Write  the  rules  for  debiting  and  crediting  Merchandise. 

(b)  What  facts  are  shown  by  the  Merchandise  account? 

(c)  Why  are   freight  and  drayage  items  charged  to   Merchandise 

account  ? 

(d)  Under  what  conditions  does  the  account  show  a  gain?     A  loss? 

(e)  How  is  the  gain  or  loss  ascertained  when  there  is  an  inventory? 


Third  Lesson 


Double  Entry  Bookkeeping 

34.  The  work  up  to  this  point  has  dealt  with  but  one  account  at  a  time,  but 
this  lesson  will  deal  with  two  accounts.  Its  purpose  is  to  develop  the  principle 
of  Double  Entry  Bookkeeping.  This  principle  is  briefly  stated  as  follows:  when- 
ever an  account  is  debited  some  other  account  is  credited  with  an  equal  amount. 

35.  The  following  rules  of  debit  and  credit  have  been  observed : 

(a)  The  Cash  account  is  debited  with  amount  of  cash  on  hand  at 

beginning  of  business  and  with  all  cash  received,  and  credited 
with  all  cash  paid  out. 

(b)  The  Merchandise  account  is  debited  with  the  amounts  of  the 

various  purchases  and  other  items  of  cost,  such  as  freight, 
drayage,  etc.,  and  for  goods  returned  to  us.  It  is  credited 
with  the  amounts  of  the  various  sales,  and  with  goods  we 
return  to  others. 

36.  The  illustrations  on  the  next  page  show  the  manner  of  keeping  a  Cash 
and  a  Merchandise  account.  Read  the  several  transactions  and  observe  that  cash 
and  merchandise  are  involved  in  each  and  that  the  same  amount  is  entered  in 
each  instance  in  both  accounts,  but  on  opposite  sides.  Apply  the  above  rules  to 
each  transaction. 

Transactions  Illustrating  Cash  and  Merchandise  Accounts 

June  1  Amount  of  cash  on  hand  $425.  (You  will  enter  this  item  on  the  debit  side  of  the 
cash  account  only.  All  other  transactions  will  require  a  corresponding  credit  for 
every  debit.) 

June  1  Bought  for  cash  130  yds.  Black  French  Voile  at  70c. 

June  1  Bought  for  cash  150  yds.  German  Broadcloth  at  $1.25. 

June  2  Sold  for  cash  45  yds.  Black  French  Voile  at  90c. 

June  2  Sold  for  cash  30  yds.  German  Broadcloth  at  $1.70. 

June  2  Sold  for  cash  25  yds.  Black  French  Voile  at  90c. 

June  3  Bought  for  cash  30  yds.  Black  French  Voile  at  70c. 

June  3  Sold  for  cash  50  yds.  Black  French  Voile  at  90c. 

June  3  Paid  for  freight  on  goods  received  on  the  1st  inst,  $3.70. 

June  4  Received  cash  for  40  yds.  German  Broadcloth  at  $1.70. 

June  4  Paid  cash  for  5  yds.  Black  French  Voile,  returned  by  customer,  at  90c. 

11 


12 


LOCK  YEAR'S    BOOKKEEPING 


June  4  Received  cash  for  55  yds.  German  Broadcloth  at  $1.70. 

June  6  Sold  for  cash  10  yds.  Black  French  Voile  at  90c. 

June  6  Sold  for  cash  25  yds.  German  Broadcloth  at  $1.70. 

June  6  Received  cash  for  35  yds.  Black  French  Voile  at  90c. 


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Illustration  No.  5 


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Illustration  No.  6 


Exercise  No.  5 

37.     Take  a  sheet  of  ledger  paper,  and  prepare  a  Cash  and  a  Merchandise 
account  from  the  transactions  given  on  the  next  page. 


LOCKYEAR'S    BOOKKEEPING 


13 


July  1 

July  1 
July  1 
July  1 
July  2 
July  2 
July  2 
July  2 
July  3 
July  3 
July  3 


July 
July 
July 
July 
July 


Dress  Goods  Transactions 

Amount  of  cash  on  hand  (Debit  cash  only),  $300. 

Bought  for  cash  125  yds.  Black  Panama  at  70c. 

Paid  cash  for  drayage  on  above,  50c. 

Bought  for  cash  80  yds.  Cashmere  at  15c. 

Sold  for  cash  20  yds.  Black  Panama  at  95c. 

Bought  for  cash  150  yds.  Mohair  Brilliantine  at  60c. 

Sold  for  cash  10  yds.  Cashmere  at  25c. 

Received  cash  for  90  yds.  Mohair  Brilliantine  at  90c. 
3     Paid  cash  for  freight  and  drayage  on  above,  3.60. 
3     Sold  for  cash  18  yds.  Mohair  Brilliantine  at  90c. 
3     Sold  for  cash  25  yds.  Black  Panama  at  95c. 
Balance  and  rule  the  Cash  account.     Do  not  close  the  Merchandise  account. 
5     Sold  for  cash  30  yds.     Cashmere  at  25c. 

Received  cash  for  22  yds.  Mohair  Brilliantine  at  90c. 

Bought  for  cash   10  yds.  Mohair  Brilliantine  at  60c. 

Sold  for  cash  40  yds.  Black  Panama  at  95c. 

Sold  for  cash  20  yds.  Cashmere  at  25c. 

The  resources  of  a  business  are  everything  of  value  belonging  to  the 


business,   as  money,   merchandise,   real   estate,   fixtures,   or   other   property   and 
amounts  owed  by  others  to  the  proprietor. 

39.  By  gain  is  meant  the  profits  obtained  by  selling  goods  for  more  than  their 
cost,  interest  received  on  notes  or  other  debts  owed  to  the  proprietor,  discounts 
allowed  to  him  by  others,  rents  paid  to  him  by  others  for  the  use  of  his  prop- 
erty, etc. 

40.  Determine  how  many  yards  of  each  kind  of  dress  goods  you  have  on 
hand,  and  compute  the  value  of  the  inventory  at  cost  price. 

41.  Make  out  oh  journal  paper  and  fill  in  with  the  proper  figures  a  form 
like  the  one  below. 

Note:     The   amounts   given    in   the   model    statement   are   simply    for   your    guidance   in 
writing  the   figures  in  their  proper   places. 


Illustration  No.  7 


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14  LOCKYEAR'S  BOOKKEEPING 

42.  Close  the  Cash  account  as  shown  in  Illustration  No.  2.  Bring  the 
balance  down. 

43.  Close  the  Merchandise  account  as  shown  in  Illustration  No.  4.  Bring 
the  inventory  down. 

44.  You  were  worth  $300.00  when  you  began  trading.  You  have  gained 
$62.15.  The  sum  sum  of  these  two  is  $362.15.  The  latter  amount  repre- 
sents what  you  are  worth  now.  Observe  that  this  amount  agrees  with  your 
resources.     Why  ? 

45.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher, 
together  with  all  the  work  called  for  in  Exercise  No.  5.  Remember  that  only  neat 
work  will  be  accepted. 

(a)     What  is  an  inventory? 

(&)     What  value  is  usually  placed  on  the  goods  on  hand? 

(c)  Suppose  the  goods  on  hand  have  increased  in  value  since  they 

were  purchased,   would  this   alter  the  inventory  valuation? 

(d)  What  is  meant  by  present  worth? 


Fourth  Lesson 


The  Personal  Account 

46.  A  personal  account  is  an  account  with  a  person,  firm  or  corporation. 

47.  When  goods  are  sold  on  credit,  that  is,  when  nothing  is  received  from 
the  buyer  in  payment  at  the  time  of  the  sale,  the  transaction  is  said  to  be  "on 
account." 

48.  "On  account  ten  days"  means  that  the  buyer  is  to  pay  for  the  goods 
within  ten  days  from  the  date  of  the  sale.  The  time  allowed  the  purchaser  in 
which  to  pay  the  bill  is  known  as  a  "term  of  credit." 

Personal  Account  Showing  a  Resource 

49.  Read  the  following  transactions  and  observe  carefully  how  each  item  is 
entered  in  the  account.  Your  aim  must  be  to  determine  the  purpose  for  which 
the  account  is  kept  and  the  manner  of  keeping  it. 

Transactions  with  David  Baum 

July  1  Sold    to    David    Baum    merchandise    amounting    to $12.50 

July  3  Bought   from   him   on   account,   merchandise 3.C0 

July  5  Received  cash   from  him   on   account 5.00 

July  6  Sell    him    groceries    amounting    to 6.75 

July  8  Received  from  him  2  office  chairs  at  $2.25 4.50 

50.  At  this  time  Mr.  Baum  wishes  to  pay  you  cash  for  the  balance  he  owes. 
You  determine  the  amount  by  taking  the  sum  of  the  credits  from  the  sum  of  the 
debits.  After  crediting  his  account  with  the  cash  received  you  will  notice  that 
the  account  balances ;  that  is,  both  sides  are  equal.  It  should  now  be  ruled  up  as 
shown  in  the  model  account.     Continue  the  transactions  given  below. 

July    9  Sell    him    on    account,    merchandise    amounting   to 9.70 

July  10  He  returns  for  credit  part  of  the  merchandise  sold  him  yesterday 4.50 

July  11  Received  cash  to  apply  on  account 3.00 

July  15  Sell  him  on  account,  merchandise  amounting  to 11.80 

July  18  Received  from  him  merchandise  to  apply  on  account 4.00 

July  19  He   paid    cash    to    apply   on    account 7.00 

15 


16 


LOCKYEAR'S  BOOKKEEPING 


July  22     Sold  him  a  bill  of  groceries  amounting  to 3.65 

July  24    Received   merchandise    from   him  on   account 4.40 

July  26     Returned  to  him  some  goods  bought  on  the  23d 2.75 

It  is  now  desired  to  balance  the  account  so  as  to  show  in  a  single  item  how 
much  is  due  from  Mr.  Baum.  Observe  how  the  account  is  balanced  by  studying 
the  model  form.     Note  that  the  balance  is  brought  down  below  the  double  rulings. 


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Illustration  No.  8 


51.  Observe  the  following: 

What  is  a  resource?     (See  Section  38.) 

Why  does  the  above  account  show  a  resource? 

Personal  Account  Showing  a  Liability 

52.  Liabilities  are  the  debts  of  a  person  or  a  business. 


* 


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7 


July 

1 

July 

2 

July 

5 

July 

8 

July 

9 

July 

11 

July 

15 

Transactions  with  Parsons  &  Scoville  Co. 

Buy  merchandise  on   account   from  the   Parsons  &   Scoville   Co $62.00 

Buy  from  them,  on  account,  merchandise   amounting  to 12.00 

Sell   them    merchandise    on    account 48.00 

Pay    them    cash    on    account 12.50 

Buy  from  them,  on  account,  invoice  of  goods  amounting  to 23  00 

Pay    them    cash    on    account 20.00 

Buy  merchandise   from  them,  on  account 7.20 


LOCKYEAR'S    BOOKKEEPING 


17 


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Illustration  No.  9 


53.  Deductions  made  from  the  foregoing  transactions : 

(a)  Debit  Persons : 

1.  For  any  goods  or  property  sold  them  on  account. 

2.  For  all  cash  paid  them  on  account. 

(b)  Credit  Persons: 

1.  For  all  goods  or  property  you  buy  of  them  on  account. 

2.  For  all  payments  received  from  them  on  account. 

(c)  When   the   debit   side    of    a   personal    account    is    the   greater, 

the  account  represents  a  debt  due  the  business.  This  is  a 
resource. 

(d)  When  the  credit  side  is  the  greater,  the  account  represents  a 

debt  owing  by  the  business.     This  is  a  liability. 

54.  Balancing  the  personal  account. 

(a)  When  a  personal  account  balances,  that  is,  when  both  sides  are 

equal,  the  account  is  ruled  up.  Then  neither  party  owes  the 
other  and  the  account  is  said  to  be  "closed." 

(b)  As  a  rule  personal  accounts  are  not  "balanced"  and  ruled  up 

until  they  are  settled  in  full,  but  it  is  often  desirable  to  do  so, 
especially  when  it  becomes  necessary  to  transfer  the  account 
to  a  new  page  or  to  a  new  ledger. 


55.     Observe  the  following  : 

Who  owes  the  $23.70? 

What  is  the  purpose  of  the  personal  account? 

Which  side  of  a  personal  account  is  the  larger  when  a  person  owes  you? 

When  you  owe  him? 


18  LOCK  YEAR'S    BOOKKEEPING 

Exercise  No.  6 

56.  Prepare  a  personal  account  with  John  Smith  from  the  following  trans- 
actions. 

Grocery  Transactions 

July     1  Sold  him  on  account  30  boxes  Jap  Rose  Soap  at  $1.00. 

July    2  Bought  from  him  on  account  5  boxes  Ivory  Soap  at  $4.50. 

July     5  Received  from  him  on  account  3  boxes  American  Family  Soap  at  $1.90. 

July     5  Sold  him  on  account  1  bag,  135  lbs.  Santos  Coffee  at  18c. 

July    8  Received  from  him  on  account  10  cases  Arm  &  Hammer  Soda  at  $3.30. 

July  13  Sold  him  on  account  4  cases  Menier  Cocoa  at  $3.25. 

July  15  Received  from  him  on  account  4  boxes  Ivory  Soap  at  $4.50. 

July  16  Pay  cash  in  full  of  account.     Rule  the  account. 

July  19  Sold  him  on  account  2  bags  Maracaibo  Coffee,  140  lbs.  at  22c. 

July  20  Received  cash  on  account  $12.00. 

July  22  Received  on  account  one  case  Baker's  Chocolate,  $4.50. 

July  25  Sold  him  on  account  one  barrel  Granulated  Sugar,  $15.00. 

July  27  Sold  him  on  account  120  lbs.  English  Breakfast  Tea  at  90c. 

57.  Directions  for  proceeding  with  the  exercise : 

(a)  Add  both  sides  of  the  account.     Who  owes  the  balance?     Is  it 

a  resource  or  a  liability?     Why? 

(b)  Balance  and  rule  the  account  as  shown  in  illustration  No.  8. 

(c)  Hand  your  work  in  for  inspection. 

58.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher : 

(a)     Write  the  rule  for  debiting  and  crediting  a  personal  account. 
(&)      If  the  debit  side  of  a  personal  account  is  greater  than  the  credit 

side,  does  it  show  a  resource  or  a  liability?     Why? 
(c)     What  term  is  used  to  express  buying  or  selling  on  credit? 


Fifth  Lesson 


Cash,  Merchandise,  Personal  and  Proprietor's  Stock  Account 

59.  It  is  customary  to  keep  a  proprietor's  stock  account  for  the  purpose 
of  showing  his  present  worth.  At  the  beginning  of  business  this  account  is 
credited  with  the  amount  of  the  investment  and  throughout  the  course  of  busi- 
ness is  credited  for  any  other  amounts  that  may  be  invested ;  it  is  debited  with 
the  various  withdrawals  that  may  be  made  by  the  proprietor. 

60.  It  is  also  customary  at  various  times  to  close  the  books  for  the  purpose 
of  determining  the  net  gain  or  net  loss  of  the  business.  If  the  business  shows  a 
net  gain  the  proprietor's  stock  account  is  credited  with  the  amount,  and  this, 
plus  the  amount  of  investment,  is  his  Present  Worth.  On  the  other  hand,  if  the 
business  shows  a  net  loss  the  proprietor's  stock  account  is  debited  with  the 
amount,  and  the  investment,  less  this  amount,  is  his  Present  Worth. 

61.  The  illustration  on  the  next  page  shows  the  manner  of  keeping  a  Mer- 
chandise, a  Cash,  a  Personal,  and  a  Proprietor's  stock  account.  Observe  that  it  is 
Double  Entry  work,  every  transaction  affecting  two  accounts. 

The  business  was  begun  with  a  cash  investment  of  $800.  By  this  is  meant 
that  $800  was  put  into  the  business.     J.  D.  Sims  was  the  proprietor. 

Transactions  Illustrating  the  Double  Entry  Principle 

May  1  Amount  of  cash  on  hand,  $800.00. 

May  1  Bought  for  cash  50  yds.  Empress  cloth  at  $1.05. 

May  1  Bought  from  B.  F.  Parker,  on  account,  100  yds.  Broadcloth  at  $2.10. 

May  2  Sold  to  Charles  Johnson,  on  account,  25  yds.  Empress  cloth  at  $1.35. 

May  3  Paid  B.  F.  Parker  cash  to  apply  on  account,  $150.00. 

May  4  Bought  for  cash  75  yds.  Empress  cloth  at  $1.05. 

May  6  Bought  from  Charles  Johnson,  on  account,  10  yds.  Broadcloth  at  $2.10. 

May  6  Sold  for  cash  50  yds.  Broadcloth  at  $2.95. 

May  7  Sold  Charles  Johnson,  on  account,  20  yds.  Empress  cloth  at  $1.35. 

May  8  Sold  for  cash  15  yds.  Broadcloth  at  $2.95. 

May  9  Received  cash  from  Charles  Johnson,  on  account,  $10.00. 

May  9  Bought  from  B.  F.  Parker,  on  account,  50  yds.  Empress  cloth  at  $1.05. 

19 


20 


LOCKYEAR'S  BOOKKEEPING 


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Illustration  No.  10 


The  Trial  Balance 

62.  You  have  observed  in  a  study  of  the  foregoing  illustrations,  that  the 
amount  involved  in  each  transaction  is  entered  in  two  accounts,  and  in  every 
instance  on  opposite  sides.  In  other  words,  every  debit  has  a  credit.  (See  Third 
Lesson,  Section  34.)  This  being  true,  it  is  obvious  that  the  sum  of  the  debits 
of  all  the  accounts  equals  the  sum  of  the  credits  of  all  the  accounts,  if  the  entries 
have  been  properly  made. 


LOCKYEAR'S    BOOKKEEPING 


21 


63.  The  Trial  Balance  is  a  test  to  ascertain  if  the  total  debits  in  the  ledger 
equal  the  total  credits.  The  trial  balance  does  not  prove  that  errors  have  not 
been  made  in  computations,  entering  a  debit  or  credit  item  on  the  proper  side 
of  the  ledger  but  in  the  wrong  account,  etc. 

Method  of  Taking  a  Trial  Balance 

64.  Learn  to  do  your  work  systematically  and  in  order.  The  force  of  this 
admonition  will  be  more  fully  appreciated  should  you  at  any  time  have  difficulty 
in  getting  your  trial  balance.  In  most  instances,  this  difficulty  may  be  traced  to 
carelessness. 

65.  The  following  is  the  manner  of  taking  the  trial  balance : 

(a)  Foot  both  sides  of  each  account  and  place  pencil  footings  in 
small  figures  directly  under  the  last  posted  item,  as  shown  in 
the  model  accounts.  Be  sure  that  your  pencil  has  a  sharp 
point. 
On  a  sheet  of  journal  paper  place  the  titles  of  the  accounts 
and  their  footings,  as  shown  in  the  model  trial  balance.  Be 
very  careful  not  to  transpose  figures  in  transferring  the  foot- 
ings from  the  ledger  to  the  trial  balance. 


~-^^z'~C^Z-^'  y^^t^ffz^^t^^e^;  ^yc-e^^  £7,     /  t?  — 


(*) 


/CS^l^S^^^A— 


Illustration  No.  11 


66.  If  the  item  $78.75  of  May  4  is  entered  properly  in  the  Cash  account,  but 
is  entered  as  $87.75  in  the  Merchandise  account,  what  effect  would  it  have  on 
the  trial  balance? 

67.  Observe  the  transaction  of  May  7:  "Sold  Charles  Johnson,  on  account, 
20  yds.  Empress  cloth  at  $1.35."  If  the  amount  had  been  entered  to  the  debit  of 
B.  F.  Parker  instead  of  Charles  Johnson,  would  it  affect  the  trial  balance?  Why? 
In  case  of  the  above  error  would  the  accounts  with  Charles  Johnson  and  B.  F. 
Parker  show  the  correct  results  ? 


22 


LOCKYEAR'S  BOOKKEEPING 


68.  If  you  have  difficulty  in  getting  your  trial  balance: 

(a)  Verify  the  footings  of  the  various  accounts. 

(b)  Verify  the  trial  balance  footing. 

(c)  Determine  whether  a  mistake  has  been  made  in  transferring 

the  footings  to  the  trial  balance. 

(d)  Check  the  entries  from  the  transactions  to  determine  whether 

every  debit  has  a  credit.     In  doing  this,  place  a  small  check 
mark  (V)  in  the  folio  column  of  the  ledger  account. 

69.  If  the  Empress  cloth  on  hand,  80  yds.,  be  inventoried  at  cost,  $1.05  a 
yd.,  and  the  Broadcloth,  40  yds.,  at  $2.10  a  yd.,  the  following  may  be  deduced 
from  the  business  as  it  now  stands : 


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*Cc<£- 


jgs^z  < 


^rtS 


Illustration  No.   12 


7  2-0 


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7' 


7-*- 


f  fd> 


r ?3 


7* 


z_ 


70.     Observe  in  the  above  statement  that  the  present  worth  is  determined 
in  two  ways : 

(a)  The   resources   minus   the  liabilities   equal   the   present   worth. 

(b)  The  net  gain  of  the  business  plus  the  original  investment  equals 
the  present  worth. 


LOCKYEAR'S    BOOKKEEPING  23 

Exercise  No.  7 

71.  In  this  exercise  you  are  to  keep  an  account  with  Cash,  one  with  Mer- 
chandise, one  with  R.  H.  Brown,  one  with  A.  C.  Hunt  and  a  Proprietor's  stock 
account.  The  title  of  this  latter  account  will  be  written  thus:  (Student's  name) 
Stock. 

Dry  Goods  Transactions 

May     1  Amount   of   cash   on   hand $25000 

May     1  Buy  from  R.  H.  Brown,  on  account,  90  yds.  Irish  Dimity  at  42c 37.80 

May     1  Buy  from  A.  C.  Hunt,  on  account,  100  yds.  Chambray  at  36c 36.00 

May    2  Buy  for  cash  40  yds.  Messaline  at  75c 30.00 

May     5  Sell  to  R.  H.  Brown,  on  account,  50  yds.  Chambray  at  48c 24.00 

May    6  Sell  to  R.  H.  Brown,  on  account,  20  yds.  Messaline  at  $1.00 20.00 

May    6  Pay  to  A.  C.  Hunt  cash  to  apply  on  account 12.00 

May    7  Buy  from  R.  H.  Brown,  on  account,  40  yds.  Satin  Duchesse  at  80c 32.00 

May    7  Sell  for  cash  6  yds.   Satin  Duchesse  at  $1.20 7.20 

May    7  Sell  to  A.  C.  Hunt,  on  account,  45  yds.  Irish  Dimity  at  60c 27.00 

May    8  Sell  for  cash  10  yds.  Satin  Duchesse  at  $1.20 12.00 

May    8  Sell  to  A.  C.  Hunt,  on  account,  20  yds.  Satin  Duchesse  at  $1.20 24.00 

May    9  Buy  from  R.  H.  Brown,  on  account,  96  yds.  Irish  Dimity  at  42c 40.32 

May    9  Received  cash  from  A.  C.  Hunt  to  apply  on  account 10.00 

May    9  Pay  R.  H.  Brown  cash  to  apply  on  account 10.00 

May  11  Sell  to  A.  C.  Hunt,  on  account,  60  yds.  Irish  Dimity  at  60c 36.00 

May  11  Pay  cash   for  drayage 75 

May  12  Buy  from  A.  C.  Hunt,  on  account,  55  yds.  Chambray  at  36c 19.80 

May  12  Sell  for  cash  20  yds.  Chambray  at  48c 9.60 

May  13  Buy  from  R.  H.  Brown,  on  account,  20  yds.  Satin  Duchesse  at  80c 16.00 

May  14  Sell  to  A.  C.  Hunt,  on  account,  7  yds.  Satin  Duchesse  at  $1.20 8.40 

May  14  Receive  from  A.  C.  Hunt  to  apply  on  account 9.00 

May  14  Pay  cash  to  R.  H.  Brown  to  apply  on  account 15.00 

72.  Proceed  with  the  work,  following  these  directions : 

(a)  Take  a  trial  balance,  as  previously  instructed,  and  hand  to  your 

teacher. 

(b)  Find  the  number  of  yards  of  each  kind  of  goods  you  have  left 

on  hand  and  figure  the  value  of  the  inventory  at  the  cost 
price. 

(c)  Find  your  total  resources. 

(d)  Find  your  total  liabilities. 

(e)  From  these  facts  find  your  present  worth. 
(/)      Find  your  gain. 

(g)     Add  this  to  your  investment. 

(h)     Make  a  statement  of  your  business,  using  the  form  shown  in 
Section  69,  and  hand  to  your  teacher. 


24  LOCKYEAR'S  BOOKKEEPING 

73.     Answer  the  following  questions  in  writing  and  hand  to  your  teacher: 

(a)  Mention  in  logical  order,  the  steps  to  he  followed  in  taking  a 

trial  balance. 

(b)  What  is  the  purpose  of  the  trial  balance? 

(c)  Where  may  errors  occur  which  would  prevent  a  balance? 

(d)  Indicate  an  error  which  would  not  prevent  a  balance. 
(c)      What  is  meant  by  resource?     Liability? 

(/)  In  what  two  ways  may  the  proprietor's  present  worth  be  deter- 
mined? 

(g)     What  is  meant  by  net  gain? 

(A)  Is  your  worth  increased  or  diminished  by  adding  your  net  gain 
to  your  investment? 

(/)      How  would  a  net  loss  affect  your  worth? 


Sixth  Lesson 


Bills  Receivable  Account 

74.  A  promissory  note  is  the  written  promise  of  one  person  to  pay  to  an- 
other or  to  his  order  a  certain  sum  of  money  at  a  certain  specified  time. 

75.  The  party  who  promises  to  pay  is  known  as  the  maker;  the  party  in 
whose  favor  the  promise  is  made  is  called  the  payee. 


Form  of  Promissory  Note 


«^^t^!^Va*.ij^V^V^T^^*nljV^V^V:^V*^V^VV^^ 


JLS<jr2?. 


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Illustration  No.  13 

76.  A  draft  is  a  written  order  of  one  party  directing  a  second  party  to  pay 
to  a  third  party,  or  his  order,  a  certain  sum  of  money  at  a  certain  time. 

77.  There  are  three  parties  to  a  draft:  the  drawer,  the  drawee  and  the 
payee. 

78.  The  drawer  is  the  person  who  issues  the  draft.     The  drawee  is  the 
person  who  is  directed  to  pay  it.    The  payee  is  the  one  in  whose  favor  it  is  made. 

25 


26 


LOCKYEAR'S    BOOKKEEPING 
Form  of  Accepted  Time  Draft 


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tfiaamwfamtfaAatM^ 


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(e)J\P/^A        ^^g^J^r^^f  \?^6^.(Z^^ 


Illustration  No.  14 

79.  A  time  draft  is  accepted  when  the  drawee  writes  across  the  face  of  the 
draft  "accepted,"  the  date  and  his  name.  By  this  act  he  obligates  himself  to  pay 
it  when  due  and  the  draft  is  then  called  an  "acceptance." 

80.  Notes  and  due  bills  signed  by  other  persons  and  time  drafts  on  other 
persons,  after  being  accepted  by  them,  are  Bills  Receivable  to  the  person  holding 
them. 

81.  The  illustration  on  the  next  page  shows  the  manner  of  keeping  a  Bills 
Receivable  account  and  the  purpose  for  which  it  is  kept.  Observe  the  entry  for 
each  transaction. 


Transactions  with  Bills  Receivable 

May    2  Received  Harvey  Ellison's  note  in  payment  for  merchandise $210.40 

May    3  Received    James    Barnes'    note    for 80.00 

May    7  Harvey  Ellison  paid  his  note  due  today,  in  cash 210.40 

May    9  Received  D.  L.  Hart's  note  for  bill  of  goods 89.40 

May  14  James  Barnes  paid  on  his  note 50.00 

May  16  Received  J.   L.   Martin's  acceptance  for  merchandise 160.00 

May  17  James  Barnes  paid  balance  due  on  his  note 30.00 

May  19  Received  from  Chas.  Adams  his  note  in  payment  for  merchandise 64.00 

May  20  D.  L.  Hart  paid  his  note,  due  today,  in  cash 89.40 


LOCK  YEAR'S    BOOKKEEPING 


27 


<?/Z&y 


3 
f 


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/*A 

2~J 


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Illustration  No.  15 

82.  Deductions  made  from  the  foregoing  transactions: 

(a)  The  Bills  Receivable  account  is  debited  for  the  face  of  the 

note  or  acceptance  received  from  others. 

(b)  The  account  is  credited  when  bills  receivable  are  paid  or  dis- 

posed of. 

(c)  When  a  part  payment  is  made  the  account  is  credited  for  the 

amount  of  the  payment  only. 

(d)  The  balance,  or  difference,  between  the  two  sides  of  the  account 

represents  the  amount  of  bills  receivable  on  hand. 

83.  Be  prepared  to  answer  these  questions: 

(a)  What  does  the  debit  side  of  the  Bills  Receivable  account  show? 

(b)  What  does  the  credit  side  show? 

(d)     What     is  the  purpose  of  the  account? 

(d)  Which  side  of  the  account  must  always  be  the  larger  and  why? 

(e)  Does  this  account  show  a  resource  or  a  liability  and  why? 

Exercise  No.  8 

84.  On  a  sheet  of  ledger  paper  prepare  a  Bills  Receivable  account  from 
the  following  transactions. 

Transactions  with  Bills  Receivable 

June  1     Received  from  Geo.  Haynes,  for  merchandise,  his  note  for $120.00 

June  2     Received  Geo.  Harper's  acceptance  at  5  days,  on  account 65.00 

June  4    Received  from  Geo.  Haynes  part  payment  on  his  note 75.00 

June  6    Received  from  E.  J.  Clark,  for  merchandise,  his  note  for 87.50 

June  6     Received  from  Geo.  H.  Harper,  in  payment  for  his  acceptance,  cash 65.00 


28 


LOCKYEAR'S  BOOKKEEPING 


June    8 

Received 

June    9 

Received 

June  10 

Received 

June  13 

Received 

Balance  and 

proceed 

with  the 

June  14 

Received 

June  16 

Received 

June  18 

Received 

June  18 

Received 

June  23 

Received 

June  25 

Received 

Balance  and 

from  Jas.  Grant,  for  merchandise,  his  note  for 167.00 

from  Geo.  Haynes,  balance  due  on  his  note 45.00 

from  Geo.  Haynes,  for  merchandise,  his  note  for 86.35 

from  E.  J.  Clark,  in  payment  for  his  note,  cash 87.50 

rule  the  account.     Bring  the  balance  down  below  the  ruling  and 
following : 

from  D.  L.  Hart  for  merchandise,  his  note  for 176.25 

from  Jas.  Grant  for  his  note,  cash 167.00 

from  C.  L.  Harter  for  merchandise,  his  acceptance  at  5  days 80.00 

from  D.  L.  Hart  for  his  note,  cash 176.25 

from  C.  L.  Harter  for  his  acceptance,  cash 80.00 

from  W.  E.  Hopkins  for  merchandise,  his  note  for 83.40 

rule  the  account  and  hand  it  to  your  teacher. 


Bills  Payable  Account 

85.  Our  written  obligations  which  we  are  to  pay  in  the  future  are  called 
Bills  Payable.    They  are  promissory  notes,  due  bills  and  our  acceptances. 

86.  The  following  illustration  shows  the  manner  of  keeping  a  Bills  Payable 
account  and  the  purpose  for  which  it  is  kept. 


May  2 
May  3 
May  5 
May  7 
May  9 
May  11 
May  12 
May  14 


Transactions  with  Bills  Payable 

Gave  my  note  for  merchandise  to  F.  C.  Johns  for $168.75 

Accepted  a  draft  in  favor  of  Chas.  Adams  for 27.35 

Made  part  payment  on  my  note  in  favor  of  F.  C.  Johns 75.00 

Gave  my  note  for  merchandise  to  B.  L.  Kain  &  Co.  for 127.45 

Borrowed  from  Geo.  Haynes  and  gave  him  my  note 140.00 

Paid  cash  for  my  acceptance  in  favor  of  Chas.  Adams 27.35 

Paid  balance  due  on  my  note  in  favor  of  F.  C.  Johns 93.75 

Paid  cash  for  my  note  in  favor  of  B.  L.  Kain  &  Co 127.45 


V?i&y 


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/.-SLg^c^o-^ 


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Illustration  No.  16 


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LOCKYEAR'S  BOOKKEEPING  29 

87.  Deductions  made  from  the  foregoing  transactions: 

(a)  When  we  issue  our  written  promises  to  pay,  Bills  Payable  ac- 

count is  credited. 

(b)  When  we  pay  our  written  promises,  Bills  Payable  account  is 

debited. 

(c)  When  we  make  a  part  payment  the  account  is  debited  only  for 

the  amount  paid. 

(d)  The  difference  between  the  two  sides  of  the  account  will  be  the 

amount  we  still  owe  on  account  of  written  promises  out- 
standing. 

88.  Be  prepared  to  answer  these  questions : 

(a)  What  does  the  credit  side  of  the  Bills  Payable  account  show? 
(&)     What  does  the  debit  side  show? 

(c)  What  does  the  balance  represent? 

(d)  What  is  the  purpose  of  the  account? 

(e)  Which  side  of  the  account  must  be  the  larger  and  why? 

(/)     Does  the  above  account  show  a  resource  or  a  liability  and  why? 

89.  To  balance  Bills  Receivable  and  Bills  Payable  accounts : 

(a)  In  red  ink  on  the  smaller  side  of  the  account  write  the  differ- 
ence, or  balance,  as  shown  in  the  model  accounts  illustrated 
in  Sections  81  and  86. 

(b)  Draw  a  single  red  line  across  the  money  column;  then  foot  the 

account,  after  which  draw  the  two-line  ruling  exactly  as  illus- 
trated in  the  models. 

(c)  Next  bring  the  balance  down  below  the  two-line   ruling.     If 

it  is  necessary  to  transfer  the  account  to  a  new  page  the 
balance  should  be  carried  to  the  proper  side  of  the  new  ac- 
count and  not  brought  below  the  ruling  of  the  old  account. 

90.  Some  bookkeepers  prefer  never  to  balance  the  Bills  Receivable  and 
Bills  Payable  accounts  except  when  they  are  to  be  transferred  to  a  new  page. 
However,  as  registers  called  the  Bills  Receivable  Book  and  the  Bills  Payable 
Book  are  usually  kept  for  the  purpose  of  recording  all  details  concerning  each 
individual  note,  there  is  no  serious  objection  to  balancing  these  accounts  at  any 
time. 

Exercise  No.  9 

91.  On  a  sheet  of  ledger  paper  prepare  a  Bills  Payable  account  from  the 
transactions  given  on  the  next  page 


30  LOCKYEAR'S    BOOKKEEPING 

Transactions  with  Bills  Payable 

June     1  Gave  the  Parsons  &  Scoville  Co  my  note  for  invoice  of  groceries $234.60 

June    2  Accepted  a  5  day  sight  draft  in  favor  of  Simmons  Hardware  Co 85.35 

June    4  Gave   Ragon    Bros,   my   note    for   invoice   of   groceries 62.75 

June    7  Made  part  payment  on  my  note  in  favor  of  the  Parsons  &  Scoville  Co 100.00 

June     7  Paid  my  acceptance  in  favor  of  Simmons  Hardware  Co 85.35 

June     7  Gave  the  Clifford  Hardware  Co.  my  note  for  invoice  of  hardware 63.80 

June  10  Paid  balance  due  on  note  in  favor  of  the  Parsons  &  Scoville  Co 134.60 

June  13  Gave  to  Mackey-Nisbet  Co.  to  settle  account,  my  note  for 85.00 

June  13  Paid  my  note  in  favor  of   Ragon   Bros 62.75 

Balance  and  rule  the  account.  Bring  the  balance  down  and  proceed  with 
the  following: 

June  15     Gave  to  Ragon  Bros,  my  note  for  invoice  of  groceries $  74.20 

June  15     Paid  my  note  in  favor  of  the  Clifford  Hardware  Co 63.80 

June  20    Gave  the  Simmons  Hardware  Co.  my  note  for  invoice  of  goods 45.60 

June  22     Paid   my   note   in   favor  of   the   Mackey-Nisbet   Co 85.00 

June  23     Gave  my  note  to  the  Igleheart  Milling  Co.  for  invoice  of  flour 87.50 

Balance  and  rule  the  account  and  hand  it  to  your  teacher. 

92.  Students  should  not  confuse  Bills  Payable  and  Bills  Receivable  with 
bills  of  goods  bought  or  sold.  When  the  purchaser  buys  goods  he  is  given  a  bill 
which  he  calls  an  invoice ;  to  the  seller  this  is  called  a  bill.  Bills  Receivable  and 
Bills  Payable  relate  wholly  to  commercial  paper  in  the  form  of  some  kind  of  a 
written  promise  to  pay,  an  ordinary  note  being  the  most  common.  If  the  written 
promise  is  in  your  favor,  or  is  given  to  another  person  and  transferred  to  you, 
it  is  a  Bills  Receivable.  If  the  written  promise  is  given  by  you,  it  is  a  Bills 
Payable.  Notes  may  be  transferred  from  one  person  to  another  by  indorse- 
ment 

93.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher : 

(a)  What  is  the  purpose  of  the  Bills  Payable  account? 

(b)  Can  the  debit  side  of  the  Bills  Payable  account  ever  show  an 

excess  over  the  credit? 

(c)  When  will  it  be  in  balance? 

(d)  Write   a   rule   for   the   debit   and   credit  of   the   Bills   Payable 

account. 

(e)  What  is  the  purpose  of  the  Bills  Receivable  account? 
(/)      When  will  it  be  in  balance? 

(g)     Write  a  rule  for  the  debit  and  credit  of  the  Bills  Receivable 
account. 


Seventh  Lesson 


The  Expense  Account 

94.  By  the  term  expense  is  meant  any  item  of  cost  in  carrying  on  a  business, 
such  as  rent,  clerk  hire,  taxes,  light,  fuel,  postage,  advertising,  etc. 

95.  When  it  is  desired  to  show  in  a  single  amount  the  outlay  for  the  leading 
expense  items  such  as  rent,  salaries,  labor,  advertising,  lighting,  postage,  etc., 
separate  accounts  should  be  opened  for  each. 

96.  The  following  illustration  shows  the  manner  of  keeping  the  account 
and  the  purpose  for  which  it  is  kept.  Read  the  transactions  and  observe  carefully 
the  entry  for  each. 

Transactions  Illustrating  Expense  Account 

May  2  Paid  cash  for  store  rent  one  month $10.00 

May  2  Paid  cash  for  stationery 2.00 

May  4  Paid  cash  for  postage  stamps 4.00 

May  5  Bought  coal  for  our  own  use 12.00 

May  7  Sold  for  cash  a  part  of  the  above  lot  of  coal 3.00 

May  9  Paid  cash   for   clerk  hire 7.00 

May  10  Rented  for  cash  one-half  our  storeroom  for  remainder  of  month 5.00 


f- 


/  0 


/ 


c/. 


-?v 


Illustration  No.  17 


97.     Deductions  made  from  the  above  transactions: 

(a)     The  Expense  account  is  debited   for  all  outlays  necessary  to 
carry  on  the  business. 

31 


32  LOCKYEAR'S  BOOKKEEPING 

(b)  The  account  is  credited  for  the  returns  from  anything  which 

has  previously  been  debited  to  expense. 

(c)  The  account  always  shows  a  loss. 

98.  Closing  the  Expense  account : 

(a)  On  the  credit  side  in  red  ink  write  the  difference  between  the 

two  sides  and  designate  it  as  loss.  Next  rule  and  foot  the 
account.  Study  carefully  the  method  as  shown  in  the  model 
account. 

(b)  Note  that  the  loss  is  not  brought  below   the   ruling.     It  will 

be  transferred  to  a  "loss  and  gain"  account  which  will  be 
more  fullv  explained  in  another  lesson. 

Exercise  No.  10 

99.  In  this  exercise  you  will  keep  accounts  with  Cash,  Merchandise,  Ex- 
pense, Bills  Payable,  Bills  Receivable,  Marshall  Field  &  Co.,  Carson,  Pirie,  Scott 
&  Co.,  E.  J.  Clark,  J.  B.  Miller,  E.  H.  Hill  and  the  proprietor. 

The  manner  of  doing  the  work  is  the  same  as  that  shown  in  the  illustration, 
Fifth  Lesson,  Sec.  61,  only  more  accounts  are  involved.  Every  time  an  account 
is  debited  there  must  be  a  credit  for  exactly  the  same  amount. 

Transactions  for  the  Dry  Goods  Business 

May  2     Student  began  the   dry-goods  business  with  a  cash  investment  of  $900.00.    (Debit 

cash  account,  credit  your  stock  account). 
May  2     Bought  from  Marshall  Field  &  Co.,  on  account,  800  yds.  Silk  Organdie  at  22c. 
May  2     Bought   from   Carson,    Pirie,    Scott  &   Co.,   on   account   10   days,   500  yds.    Persian 

Lawn  at  15c. 
May  3     Paid  cash  for  rent  of  store,  $25.00. 
May  3     Bought    from    Mandel    Brothers,    and   gave   in   payment   my   note,   650  yds.    White 

Mull  at  17c. 
May  4     Sold  to  E.  J.  Clark,  on  account,  370  yds.  Silk  Organdie  at  29c. 
May  4     Bought  on  account  from  Marshall  Field  &  Co.,  1000  yds.  English  Madras  at  19c. 
May  5     Paid  cash  for  stationery  and  stamps,  $15.00. 
May  6     Sold  to  E.  J.  Coons  for  his  note,  450  yds.  White  Mull  at  22c. 
May  6    J.  B.  Miller  bought  on  account,  540  yds.  English  Madras  at  32c. 
May  7     Sold  for  cash  275  yds.    Persian  Lawn  at  19c. 
May  7     Paid  cash  to  Marshall  Field  &  Co.,  to  apply  on  account,  $150.00. 
May  9     Received  from  J.  B.  Miller  note  to  pay  for  goods  sold  to  him  May  6. 

100.  The  effect  of  receiving  this  note  is  simply  to  postpone  the  payment  of 
J.  B.  Miller's  account.  However,  the  note  is  written  evidence  of  the  debt,  and  is 
preferable  to  the  open  account. 

As  this  payment  closes  the  account,  you  will  rule  it.  There  being  only  one 
item  on  each  side,  it  is  ruled  by  drawing  double  rulings  underneath  the  amounts 


LOCKYEAR'S  BOOKKEEPING  33 

across  the  money  and  the  date  columns.     Do  not  draw  the  double  rulings  across 
the  explanation  columns. 

May    9     Bought    from    Stewart    Dry    Goods    Co.,    for    cash,    1500    yds.    White    Pearline 

Batiste  at  30c. 
May  10     Sold  to  E.  J.  Clark,  on  account,  300  yds.   Silk  Organdie  at  29c;  200  yds.   English 
Madras  at  32c. 

Paid  cash  for  my  note  favor  of  Mandel  Bros.,  given  on  the  third  inst. 

Sold  to  E.  H.  Hill,  on  account,  900  yds.  White  Pearline  Batiste  at  40c. 

Gave  Carson,  Pirie,  Scott  &  Co.,  my  note  to  pay  for  invoice  of  the  second  inst. 

Bought  for  cash  6  office  chairs  at  $4.00. 

E.  J.  Clark  paid  cash  on  account,  $175.00. 

Bought  from  Carson,  Pirie,  Scott  &  Co.,  700  yds.  Silk  Organdie  at  22c. 

A.  J.  Coons  paid  cash  for  his  note  of  the  6th  inst. 

Sold  to  E.  J.  Clark,  on  account,  560  yds.  white  Pearline  Batiste  at  40c. 

Bought  from  Marshall  Field  &  Co.,  on  account,  250  yds.  White  Mull  at  17c. 

Sold  for  cash,  2  office  chairs  at  $3.75. 

Gave  Marshall  Field  &  Co.  my  note  for  $190.00  on  account. 

Sold  to  E.  H.  Hill  400  yds.  Silk  Organdie  at  29c. 

Received  from  E.  J.  Clark  cash  in  full  of  account. 
Note:     When  an  account  is  paid  in  full  it  should  be  ruled. 

Bought  from  Marshall  Field  &  Co.,  400  yds.  White  Pearline  Batiste  at  30c. 

Sold  to  John  Stark  for  his  note,  200  yds.  White  Mull  at  22c. 

Sold  to  J.  B.  Miller,  on  account,  500  yds.  Silk  Organdie  at  29c. 

Bought  from  Carson,  Pirie,  Scott  &  Co.,  on  account,  350  yds.  white  Pearline  Batiste 

at  30c. 
Paid  Marshall  Field  &  Co.  cash  in  full  of  account. 
Received  from  J.  B.  Miller  cash  on  account,  $50.00. 
Received  cash  from  E.  H.  Hill  for  bill  sold  him  on  the  12th  inst. 
Paid  cash  for  my  note  favor  Carson,  Pirie,  Scott  &  Co.,  given  on  the  12th  inst. 
Sold  for  cash,  100  yds.  white  Pearline  Batiste  at  40c. 
Sold  for  cash  150  yds.  Silk  Organdie  at  29c. 

101.     Proceed  as  follows: 

(a)  Take  a  Trial  Balance  as  instructed  in  the  Fifth  Lesson,  Sec- 
tion 65. 

Note:     In    case    you    fail   to   get   the    balance    follow   the   directions   given    in    the    Fifth 
Lesson,  Section  68. 

(b)  Balance  the  Cash  account. 

(c)  Inventory  the  merchandise  on  hand  at  cost. 

(d)  Determine  your  Resources. 

(e)  Determine  your  Liabilities. 
(/)     Determine  your  Present  Worth. 
(g)     Determine  your  gain  on   Merchandise.     See  Second  Lesson, 

Section  27. 
(h)     The  Expense  account  shows  a  loss.     How  much? 


May 

11 

May 

12 

May 

12 

May 

13 

May 

13 

May 

14 

May 

14 

May 

14 

May 

16 

May 

h) 

May 

17 

May 

17 

May 

17 

May 

18 

May 

19 

May 

19 

May  20 

May  20 

May 

21 

May 

21 

May 

21 

May 

23 

May 

23 

34 


LOCKYEAR'S  BOOKKEEPING 


(i)      The  gain  less  the  loss  equals  the  Net  Gain.     How  much? 
(/)     The  Net  Gain  plus  the  amount  of  cash  you  had  on  hand  at 
the  beginning  of  business  equals  what? 

Note:     This   last    amount    must    agree    with    the    difference    between    the    resources    and 


the  liabilities. 


(k)  On  a  sheet  of  journal  paper  make  a  statement  using  the  form 
shown  in  Illustration  No.  18.  Do  not  lose  sight  of  the  fact 
that  good  mechanical  work  is  essential. 

(/)  Hand  the  Trial  Balance,  Statement,  and  Ledger  Accounts  to 
your  teacher  for  inspection. 


_5a^i^?>2S^?^-^-^£->5^"    <^^z-t/'  -2-^.    '  <2  ■ 


\JzZ<>c£e^&  Jj^-e^Le^z^-  ^r^T^&^y 


Illustration  No.  18 


LOCKYEAR'S  BOOKKEEPING  55 

102.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher: 

(a)  Write  the  rules  for  debiting  and  crediting  Expense. 

(b)  What  is  the  purpose  of  the  Expense  account? 

(c)  How  is  the  Net  Gain  of  a  business  determined? 

(d)  When  the  Net  Gain  is  known  how  is  the  Present  Worth  de- 

termined ? 

(e)  In  case  one  fails  to  get  a  trial  balance  what  steps  should  be 

taken  to  locate  the  error? 

Rules  of  Debit  and  Credit 

103.  Up  to  this  point  your  work  has  covered  a  study  of  the  following  ac- 
counts :  Cash,  Merchandise,  Personal,  Bills  Receivable,  Bills  Payable  and  Ex- 
pense. 

Rules  of  Debit  and  Credit  for  these  accounts  are  here  given  for  reference. 
It  is  not  advised  that  they  be  memorized  at  this  time,  but  they  should  be  remem- 
bered because  they  will  be  used  and  referred  to  hereafter. 

Cash 

104.  Debit  Cash. 

(a)  For  amount  of  cash  on  hand  at  beginning  of  business. 

(b)  For  all  cash  received. 

105.  Credit  Cash. 

For  all  cash  paid  out. 

Merchandise 

106.  Debit  Merchandise. 

(a)  For  the  inventory  or  stock  of  goods  on  hand  at  the  beginning 

of  business. 

(b)  For  all  Merchandise  bought. 

(c)  For  Merchandise  which  is  returned  to  us  after  having  been 

credited  to  Merchandise. 

(d)  For  all  charges,  such  as  freight,  drayage,  etc.,  unless  separate 

accounts  are  kept. 

107.  Credit  Merchandise. 

(a)      For  all  Merchandise  Sales. 

(&)      For  goods  returned  by  us  after  having  been  charged  to  Mer- 
chandise. 

(c)  For  Merchandise  used  for  private  purposes. 

(d)  For  money  received  for  Merchandise  which  has  been  damaged 

or  destroyed. 


36  LOCKYEAR'S    BOOKKEEPING 

Expense 

108.  Debit  Expense. 

(a)  For  what  is  bought  to  be  consumed  or  used  in  carrying  on 

the  business. 

(b)  For  cost  of  rents,  fuel,  light,  advertising,  salaries,  etc.,  when 

not  charged  to  other  accounts. 

109.  Credit  Expense. 

For   anything  which   is   sold  that  has  previously  been  charged  to 
expense. 

Bills  Receivable 

110.  Debit  Bills  Receivable. 

For  notes,  time  drafts,   or   any  other   written  obligations   received 
from  others. 

111.  Credit  Bills  Receivable. 

For  notes,  time  drafts,  or  any  other  written  obligations  of  others 
when  they  are  paid,  discounted  or  disposed  of  in  any  manner. 

Bills  Payable 

112.  Debit  Bills  Payable. 

For  our  notes,  acceptances,  or  any  other  written  obligations  when 
they  are  paid. 

113.  Credit  Bills  Payable. 

For  our  notes,  acceptances,  or  any  other  written  obligations  when 
they  are  given. 

Personal  Accounts 

114.  Debit  Persons. 

(a)  For  what  they  owe  you  at  the  time  of  opening  the  account. 

(b)  For  any  goods  or  property  sold  them  on  account. 

(c)  For  all  cash  paid  them  on  account. 

115.  Credit  Persons. 

(a)  For  what  you  owe  them  at  the  time  of  opening  the  account. 

(b)  For  all  goods  or  property  you  buy  of  them  on  account. 

(c)  For  all  payments  received  from  them  on  account. 


Eighth  Lesson 


The  Proprietor's  Investment  Account 

116.  As  was  stated  in  the  Fifth  Lesson,  Section  59,  it  is  necessary  to  keep  a 
proprietor's  investment  account  with  the  person  who  owns  the  business,  or  with 
each  partner,  if  it  be  a  partnership  business.  At  that  point  only  the  purpose  of 
the  account  was  stated ;  at  this  time  it  is  desired  to  deal  with  the  account  more 
fully,  and  the  following  illustrations,  if  carefully  studied,  will  show  the  object 
and  the  manner  of  keeping  it. 

Transactions  Illustrating  the  Proprietor's  Account 

117.  It  is  assumed  that  A.  J.  Harter  is  the  proprietor  and  that  his  invest- 
ment amounts  to  $800. 

May  2     Amount   of    investment $800.00 

May  5     He  withdrew  cash  from  business  for  personal  use 10.00 

June  7     He  took  from  the  business  for  family  use  merchandise  amounting  to 7.00 

June  12     He  took  cash  from  the  cash  drawer  to  pay  house  rent 9.50 

July  16    He  invested  in  the  business 200.00 

July  20     He  took  from  the  business  for  family  use  merchandise  amounting  to 6.80 

July  30  On   this    date   it    has    been    determined   that    the    net   gain    of    the    business 

amounts  to    120.00 

118.  After  the  net  gain  has  been  entered  on  the  credit  side  of  the  proprie- 
tor's account,  the  account  is  closed  so  as  to  show  in  a  single  amount  the  present 
worth  of  the  proprietor. 

Observe  the  following : 

The  total  investment  is  how  much  ? 

The  total  withdrawal  is  how  much? 

The  present  worth  is  determined  how  ? 

Continue  the  account  with  the  following  transactions : 

August     6  A.  J.  Harter  makes  another  cash  investment $300.00 

August  20  He  takes  cash  from  the  drawer  to  pay  house  rent 12.00 

Sept.         1  He  pays  a  private  debt  amounting  to 6.00 

Sept.      27  He  invests  cash  in  the  business 80.00 

Oct.        12  He  takes  cash  from  the  drawer  for  personal  expenses 13.75 

Oct.        30  At  this  time  it  has  been  found  that  the  business  shows  a  loss  of 26.80 

37 


38 


LOCK  YEAR'S  IK  )( )KKEEPING 


119.     Observe  the  manner  of  entering  the  loss  as  illustrated  in  the  model 
account.     Note  how  this  differs  from  the  manner  of  entering  a  gain. 
Observe  the  following : 

Total  of  the  investment,  plus  the  present  worth  July  30,  is  how  much  ? 

The  cash  withdrawn  is  how  much? 

The  cash   withdrawals,  plus  the  net  cost  of  goods  withdrawn,   is  how 

much  ? 
How  is  the  present  worth  found? 


Illustration  No.  19 


120.  Deductions  made  from  the  foregoing  transactions: 

(a)  The  proprietor  is  credited  in  his  account  for  all  that  he  invests 

in  the  business. 

(b)  He  is  debited   for  all   withdrawals  of   cash  or  property   for 

personal  use. 

(c)  He  is  credited  for  the  net  gain. 

(d)  He  is  debited  for  the  net  loss. 

(e)  His  present  worth  is  the  difference  between  the  two  sides  of 

the   account   after  the  net  gain  or  the   net   loss  has  been 
properly  entered. 

121.  Manner  of  closing  the  investment  account: 

(a)     The  net  gain  is  entered  on  the  credit  side  by  writing  the  date, 
net  grain  and  the  amount. 


Li  ICKYEAR'S    B<  M  IKKEEPING 


39 


(b)  Next  write  in  red  ink  on  the  debit  side  of  the  account  the 

date,  present  worth  and  amount. 

(c)  If  there  is  a  net  loss  it  is  entered  on  the  debit  side,  after  which 

the  account  is  balanced  as  shown  in  the  latter  part  of  Illus- 
tration No.   19. 

(d)  After   footing  and   ruling  the   account   the   present   worth   is 

brought  down  on  the  opposite  side  of  the  account  in  black 
ink. 
Study  carefully  the  model  ledger  form  for  A.  J.  Harter. 


Investment  Account  in  a  Partnership  Business 

122.  If  a  business  is  conducted  by  two  or  more  partners,  separate  accounts 
are  kept,  each  partner  being  credited  with  his  investments  and  with  his  share  of 
the  net  gain,  if  the  business  shows  a  gain ;  and  debited  with  withdrawals  and  with 
his  share  of  the  net  loss,  if  the  business  shows  a  loss.  Each  partner  is  also 
debited  with  all  personal  debts  assumed  or  paid  by  the  business. 

Transactions  Illustrating  Partnership  Accounts 

May     2    J.    W.    Carter   invests $1,800.00 

May     2     M.  C.  Harmon  invests 2,000.00 

May     5     J.  W.  Carter  took  from  the  business  for  family  use  merchandise  amount- 
ing  to    12.85 

May   19     M.  C.  Harmon  took  cash  from  the  drawer  to  pay  house  rent 15.00 

June     1     J.  W.  Carter  invests  in  the  business 200.00 

June  20     M.  C.  Harmon  took  from  the  business  for  family  use  merchandise  amount- 
ing  to    13.70 

June  27     Paid  a  personal  bill  for  J.  W.  Carter 85.00 

July      1     Paid  premium  on  insurance  policy  for  M.  C.  Harmon 35.45 

July    30     On  this  date  it  is  determined  that  the  gain  for  the  three  months  amounts 

to     278.00 


J^.3/r<2«^^-j£L 


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• 


C^LtevJ-sfe/zA- 


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2-0  V/ 


Illustration  No.  20 


40 


LOCKYEAR'S  BOOKKEEPING 


Illustration  No.  21 


123.  Observe: 

(a)  That  the  partners  are  debited  with  withdrawals  from  the  busi- 

ness, and  with  private  debts  paid  by  the  business. 

(b)  That  they  are  credited   with   the  amounts  invested,   and   for 

one-half  the  gain  each. 

Exercise  No.  11 

124.  On  a  sheet  of  ledger  paper  enter  the  following  transactions.    The  pro- 
prietors are  Geo.  Thurman  and  F.  G.  Johns. 

Partnership  Transactions 

May     2     Geo.    Thurman   invests $2,200.00 

May    2     F.  G.  Johns  invests 2,500.00 

May   10     Geo.  Thurman  took  from  the  business  for  family  use  merchandise  amount- 
ing to   13.25 

May   12     Paid  for  repairing  F.  G.  Johns'  dwelling  house,  cash 42.80 

May   18    Geo.  Thurman  drew  from  the  business  for  personal  use,  cash 12.C0 

June  14     Geo.  Thurman  invests  in  the  business,  cash 300.00 

June  21     F.  G.  Johns  drew  from  the  business  for  private  use,  cash 30.00 

June  30     F.  G  Johns  owed  a  note  of  $38  due  on  this  date.     This  amount  was  paid 
with   cash   taken    from   the   drawer. 

July     2    Geo.  Thurman  takes  cash  from  the  drawer  to  pay  a  private  bill 18.25 

July    18     F.  G.  Johns  took  from  the  business  for  family  use  merchandise  amounting 

to    9.60 

July    30     On  this  date  the  books  show  a  gain  for  the  three  months  of  $680.40  which, 
according  to  the  agreement,  is  to  be  divided  equally  between  the  partners. 

125.  Determine  the  present  worth  of  each  partner  and  balance  and  rule 
the  accounts.     When  completed  hand  to  your  teacher  for  approval. 

126.  When  unable  to  pay  his  debts,  a  person  is  said  to  be  insolvent.     The 
debit  side  of  the  proprietor's  account  will  be  the  greater  if  he  is  insolvent. 


LOCK  YEAR'S    BOOKKEEPING 


41 


Interest  and  Discount  Account 

127.  Interest  is  a  premium  allowed  for  the  use  of  money. 

128.  Discount  is  an  amount  deducted  from  the  face  of  the  note,  bill  or 
personal  account,  the  deduction  being  made  to  induce  persons  to  pay  their  obliga- 
tions, before  due. 

A  borrower  sometimes  receives  less  than  the  face  of  his  note,  this  deduction 
being  known  as  discount. 

129.  Interest  and  discount  are  debited  when  a  loss  to  the  business,  and 
credited  when  a  gain. 

130.  A  careful  study  of  the  following  illustrations  will  disclose  the  purpose 
for  which  the  Interest  and  Discount  account  is  kept  and  the  manner  of  keeping  it. 
Read  each  transaction  and  observe  how  it  is  entered.  Assume  that  you  are  the 
proprietor. 

Transactions  Illustrating  the  Interest  and  Discount  Account 

May    2    J.  W.  Stevens  pays  his  note,  face  $180,  in  my  favor,  with  interest  amounting  to 

$10.80. 
May    3    J.  W.  Stock  owes  me  on  account  $80  due  July  1.     I  accept  $75  on  this  date  in  full 

of  account.     Discount  $5. 
May    9    I  give  my  note  to  the  Old  National  Bank  for  $78,  the  proceeds  of  which  were  $75. 

Discount  $3. 
May  10    B.  F.  Moore  pays  his  note,  face  $60,  in  my  favor,  with  interest  amounting  to  $2.80. 
May  14    I  owe  the  Parsons  &  Scoville  Co.  a  bill  of  $90.50  due  June  1.     They  accept  $88  in 

full  of  account.     Discount  $2.50. 
May  17     R.  D.  Newton  owes  me  an  account  $32.75  due  July  1.     I  accept  $31.00  in  full  of 

account.     Discount  $1.75. 
May  20    J.  W.  Baldwin  pays  his  note,  face  $180,  in  my  favor,  with  interest  amounting  to 

$12.80. 
May  21     I  pay  my  note  in  favor  of  Mackey-Nisbet  Co.,  face  $108.50,  with  interest  amount- 
ing to  $7.40. 
May  25     S.  W.  Hart  owes  me  on  account  $45  due  June  25.     I  accept  $42.75  in  full  of  account 

Discount  $2.25. 


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Note:     The  explanations   "Int.    paid,"   "Disc,    allowed,"   etc.,   are   not   a   necessary   part 
of  the  account,  but  are  used  to  enable  the  student  to  understand  the  account. 


42  LOCKYEAR'S  BOOKKEEPING 

131.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher: 

(a)  Write  the  rules  for  debiting  and  crediting  Interest  and  Dis- 

count. 

(b)  What  does  the  debit  footing  represent? 

(c)  What  does  the  credit  footing  represent? 

(d)  Does  the  difference  represent  a  resource,  a  liability,  a  loss  or 

a  gain? 

(e)  Copy  the  account  on  a  sheet  of  ledger  paper,  balance,  and 

rule  it,  and  hand  to  your  teacher. 

132.  There  is  a  distinction  between  interest  and  discount  on  commercial 
paper,  and  discounts  allowed  for  paying  a  bill  of  goods  before  the  expiration  of 
the  term  of  credit  and  discounts  allowed  on  personal  accounts.  The  latter  two 
properly  belong  to  the  Merchandise  account.  If  it  is  desired  to  know  the  exact 
amount  of  loss  or  gain  due  to  such  allowances,  an  account  may  be  opened  under 
the  title  "Merchandise  Discount."  If  this  account  is  not  kept,  the  discount  may 
be  entered  direct  to  the  Merchandise  account. 

Exercise  No.  12 

133.  Interest  and  the  various  kinds  of  discounts  are  often  kept  in  one 
account  under  the  title  "Interest  and  Discount."  You  will  observe  this  method 
in  the  preparation  of  an  Interest  and  Discount  account  from  the  transactions  given 
below. 

Transactions  with  Interest  and  Discount 

May  2  I  owe  the  Parsons  &  Scoville  Co.,  on  account,  $47.50,  due  June  1.  I  pay  them  $46  in 
full  of  account.     Discount  $1.50. 

May  3  I  give  my  note  at  the  Old  National  Bank  for  $97.50;  the  proceeds  are  $95,  the 
interest  $2.50. 

May    5     I  pay  my  note  favor  J.  A.  Slocum,  face  $190,  with  interest  amounting  to  $12.90. 

May  7  A.  L.  Ford  owes  me  on  account,  due  June  10,  $28.95.  I  accept  $26  in  full  of  account. 
Discount  $2.95. 

May  12     C.  F.  Jones  pays  his  note  in  my  favor,  face  $237,  with  interest  amounting  to  $23.45. 

May  14    I  discount  Chas.  Munford's  note  at  the  bank,  face  $180.     Amount  of  discount  $6.40. 

May  17  I  owe  the  Mackey-Nisbet  Co.,  on  account,  due  June  1.  $76.80.  I  pay  them  $72  in 
full  of  account.     Discount  $4.80. 

May  20    J.  W.  Stone  pays  his  account,  $38.75,  which  was  due  Feb.  15.     Interest  on  same  90c. 

May  24  I  hold  C.  W.  Johnson's  note  for  $400,  due  Aug.  1,  without  interest.  I  allow  a  dis- 
count of  $18  and  he  pays  it  on  this  date. 

May  27  I  buy  a  bill  of  goods  from  the  Parsons  &  Scoville  Co.  amounting  to  $128.40,  due 
in  30  days.     I  pay  on  this  date  and  am  allowed  a  discount  of  3  per  cent. 

Balance  and  rule  the  account. 


LOCKYEAR'S  BOOKKEEPING  43 

134.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher: 

(a)  The  interest  paid  by  you  and  the  discounts  allowed  by  you 

amount  to  what? 

(b)  The  interest  paid  to  you  and  the  discounts  allowed  to  you 

amount  to  what? 

(c)  Is  the  difference  between  the  two  a  gain  or  a  loss? 

Rules  of  Debit  and  Credit 

135.  The  following  rules  for  debit  and  credit  of  the  Proprietor's  invest- 
ment account  and  Interest  and  Discount  account  are  for  reference.  They  should 
be  remembered,  but  it  is  not  necessary  to  memorize  them. 

Proprietor's  Investment  Account 

136.  Debit  the  Proprietor. 

(a)  For  all  amounts  withdrawn  from  the  business. 

( b)  For  all  debts  assumed  or  paid  by  the  business  for  him. 

(c)  For  the  net  loss  of  the  business. 

137.  Credit  the  Proprietor. 

(a)  For  amounts  invested. 

(b)  For  the  net  gain  of  the  business. 

Interest  and  Discount 

138.  Debit  Interest  and  Discount. 

(a)  For  interest  paid. 

(b)  For  discount  allowed  by  you. 

139.  Credit  Interest  and  Discount. 

(a)  For  interest  received. 

(b)  For  discount  allowed  to  you. 


Ninth  Lesson 


Interest  Bearing  Notes  and  Compound  Entries 

140.     Promissory  notes  bear  interest  only  when  so  stated  or  after  they  are 


due. 


141.  No  entry  is  made  for  interest  or  discount  until  received  or  paid. 

142.  The  following  transactions  illustrate  the  manner  of  entering  Bills 
Payable  and  Bills  Receivable  when  they  bear  interest.  Read  each  transaction 
carefully  and  notice  how  it  is  entered  in  the  model  accounts. 


Jan.  2 
Jan.  9 
Feb.  4 
Feb.  7 
Feb.  9 


Mar. 
Mar. 
Mar. 
Apr. 
Apr. 

June 

June 


Transactions  Illustrating  Interest  Bearing  Notes 

Give  your  note,  favor  Geo.  Thomas,  for  three  months,  interest  at  6  per  cent,  for  $800. 
Receive  from  J.  W.  Wilson  his  note  in  your  favor,  for  1  mo.,  at  6  per  cent,  for  $900. 
Give  your  note,  favor  Jas.  Klein,  for  2  mo.,  interest  at  6  per  cent,  for  $400. 
Receive  from  S.  W.  Harris  his  note,  in  your  favor,  for  1  mo.,  at  6  per  cent,  for  $300. 
J.  W.  Wilson  pays  his  note,  $900,  due  this  date,  with  interest  $4.50. 

Note:     Observe  that  Bills  Receivable  is  credited  with  $900  and  that  Interest  and  Dis- 
count is  credited  with  $4.50. 
6    Give  your  note,  favor  Geo.  Willis,  for  3  mo.,  interest  at  6  per  cent,  for  $200. 

S.  W.  Harris  pays  his  note,  $300,  due  this  date,  with  interest  amounting  to  $1.50. 
Receive  from  J.  A.  Burns  his  note,  in  your  favor,  for  3  mo.,  at  6  per  cent,  for  $700. 
Pay  your  note  in  favor  of  Geo.  Thomas,  $800,  with  interest  amounting  to  $12. 
Pay  your  note  in  favor  of  Jas.  Klein,  $400,  due  this  date,  with  interest  amounting 
to  $4. 
6     Pay  your  note  in  favor  of  Geo.  Willis,  $200,  due  this  date,  with  interest  amounting 
to  $3. 
27    J.  A.  Burns  pays  his  note  $700,  due  this  date,  with  interest  amounting  to  $10.50. 


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44 


LOCKYEAR'S    BOOKKEEPING 


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143.  Deductions  made  from  the  foregoing  transactions : 

(a)      Bills  Payable  is  credited  with  the  face  of  the  note  when  given 
out. 

(&)      Bills  Payable  is  debited  when  all  or  part  of  our  note  is  paid, 
(c)      Interest  and  Discount  account  is  debited  with  the  amount  of 

interest  paid. 
((/)     Interest  and  Discount  account  is  credited  with  the  amount  of 

interest  received. 
(e)     Bills  Receivable  is  debited  with  the   face  of   the  note  when 

received. 
(/)      Bills  Receivable  is  credited  with  the  face  of  the  note  when 

paid  or  disposed  of. 

144.  It  has  been  previously  stated  that  the  Bills  Payable  account  is  kept 
for  the  purpose  of  showing  at  any  time  the  amount  of  outstanding  bills  payable ; 
and  that  the  Bills  Receivable  account  is  kept  for  the  purpose  of  showing  at  any 
time  the  amount  of  bills  receivable  on  hand.  From  this  it  is  obvious  that  in 
case  of  an  outstanding  note  being  paid,  Bills  Payable  must  be  debited  with  the 
face  of  the  note  and  not  with  the  amount ;  and  that  when  a  bill  receivable  is  paid  the 
Bills  Receivable  account  must  be  credited  with  the  face  of  the  obligation  and  not 
with  the  amount. 


46  LOCKYEAR'S    BOOKKEEPING 

Exercise  No.  13 

145.     From  the  transactions  given  below  you  are  to  prepare  Bills  Payable, 
Bills  Receivable  and  Interest  and  Discount  accounts. 

Transactions  with  Interest  Bearing  Notes 

June     1  Give  your  note,  favor  Jas.  Harvey,  for  2  mo.,  interest  at  6  per  cent,  for  $500. 

June   13  Receive  from  J.  W.  Wilson,  his  note,  in  your  favor,  for  2  mo.,  at  6  per  cent,  for  $700 

June  28  Give  your  note,  favor  A.  L.  Tyner,  for  3  mo.,  interest  at  6  per  cent,  for  $300. 

July      1  Receive  from  S.  W.  Harris,  his  note,  in  your  favor,  for  2  mo.,  at  6  per  cent,  for  $200. 

July    14  Give  your  note,  favor  Geo.  Thomas,  for  2  mo.,  at  6  per  cent,  for  $250. 

Aug.     1  Pay  your  note,  in  favor  of  Jas.  Harvey,  $500,  with  interest  amounting  to  $5. 

Aug.     2  Receive  from  J.  A.  Harmon,  his  note  in  your  favor,  for  1  mo.,  at  6  per  cent,  for 


Aug.    13  J.  W.  Wilson  pays  his  note,  $700,  due  this  date,  with  interest  amounting  to  $7. 

Aug.  30  Give  your  note,  favor  Jas.  Klein,  for  1  mo.,  at  6  per  cent,  for  $1,000. 

Sept.     1  S.  W.  Harris  pays  his  note,  $200,  due  this  date,  with  interest  amounting  to  $2. 

Sept.     2  J.  A.  Harmon  pays  his  note,  $800,  due  this  date,  with  interest  amounting  to  $4. 

Sept.    4  Receive  from  J.  A.  Burns,  his  note,  in  your  favor,  for  1  mo.,  at  6  per  cent,  for  $900. 

Sept.  14  Pay  your  note,  $250,  favor  Geo.  Thomas,  with  interest  amounting  to  $2.50. 

Sept.  28  Pay  your  note,  $300,  favor  A.  L.  Tyner,  with  interest  amounting  to  $4.50. 

Sept.  30  Pay  your  note,  $1,000,  in  favor  Jas.  Klein,  with  interest  amounting  to  $5. 

Oct.     4  J.  A.  Burns  pays  his  note,  $900,  due  this  date,  with  interest  amounting  to  $4.50. 

146.  Observe  the  following: 

Does  the   Interest   and   Discount   account   show   a  gain  or  loss? 

How  much? 
Balance  the  account  by  writing  the  loss  or  gain  in  the  proper  place 

in  red  ink. 
Hand  the  work  to  your  teacher. 

Compound  Entries 

147.  Compound  entries  are  those  affecting  more  than  two  accounts. 

Thus  far  in  applying  the  principle  of  double  entry,  there  have  been  only 
two  accounts  involved  in  each  transaction. 

148.  Transactions  may  require : 

(a)  One  debit  and  one  credit. 

(b)  One  debit  and  two  or  more  credits. 

(c)  Two  or  more  debits  and  one  credit. 

(d)  Two  or  more  debits  and  two  or  more  credits. 

In  either  of  the  above  cases,  the  sum  of  the  debit  items  must  equal  the  sum 
of  the  credit  items. 


LOCKYEAR'S  BOOKKEEPING  47 

149.  The  purpose  of  the  following  illustration  is  to  show  the  manner  of 
making  compound  entries,  particularly 

(a)  When    interest  hearing  notes  are  paid. 

(b)  When  discounts  are  allowed  on  personal  accounts. 

150.  Study  carefully  the  entry   for  each  transaction  hy   referring  to   the 
model  accounts. 

Transactions  Illustrating  Compound  Entries 

May    2    Amount  of  cash  on  hand  $800. 

May    2     Buy  invoice  of  groceries  from  Parsons  &  Scoville,  on  account  30  days,  amounting 

to  $180. 
May     2     Buy   invoice   of    hardware    from   the    Clifford   Hardware   Co.,    amounting   to   $300, 

for  your  note  at  30  days,  with  interest  at  8  per  cent. 
May    5     Sell  to  J.  B.  Reed,  on  account  60  days,  groceries  amounting  to  $45.40. 
May     7     Buy  from  Parsons  &  Scoville,  on  account  60  days,  invoice  of  groceries  amount- 
ing to  $300. 
May    7     Sell  to  Chas.  Adams  merchandise  amounting  to  $38.75  for  his  note  at  8  per  cent, 

due  in  60  days. 
May    9     Pay   cash,   $175,    for   invoice   of   groceries   bought    from    Parsons    &    Scoville,   on 

May  2,  a  discount  of  $5  being  allowed. 
150a.  Observe  that  the  above  transaction  affects  three  accounts,  requiring  a 
Compound  Entry — Parsons  &  Scoville  must  be  debited  with  the  full  amount  of 
the  bill  $180,  while  Cash  must  be  credited  with  $175,  and  Interest  and  Discount 
credited  with  $5.  Observe  that  the  underlying  principle  of  Double  Entry  book- 
keeping, "every  debit  must  have  an  equal  credit,"  is  not  violated  by  this  entry  as 
the  two  "credits"  equal  the  one  "debit."  Why  should  Parsons  &  Scoville  be 
debited  for  $180  instead  of  the  amount  paid  them? 
May  10     Buy   invoice   of   merchandise   amounting   to   $90   for  your  note  at  60   days   with 

interest  at  8  per  cent. 
May  25     Sell  to  J.  B.  Reed,  on  account  30  days,  merchandise  amounting  to  $50.75. 
May  25     Sell  to  W.  J.  Carter  merchandise  amounting  to  $60  for  his  note  due  in  30  days, 

with  interest  at  8  per  cent. 
June    2     Pay  your  note,  $300,  in  favor  the  Clifford  Hardware  Co.,  with  interest  amounting 

to  $2. 

Note:     Observe    that    the    above    transaction    affects    three    accounts,     fash    is    credited 
with  $302,  Bills  Payable  is  debited  with  $300,  and  Interest  and  Discount  is  debited  with  $2. 

June    4    J.  B.  Reed  pays  cash,  $42,  for  bill  of  goods  bought  May  4,  a  discount  of  $3.40 

being  allowed. 
June    6     Pay  Parsons  &  Scoville  cash,  $290,  for  invoice  of  groceries  purchased  May  7th,  a 

discount  of  $10  being  allowed. 
June    7     J.  B.  Reed  pays  cash,  $49,  for  bill  of  goods  bought  May  25,  a  discount  of  $1.75 

being  allowed. 
June  25     J.  W.  Carter  pays  cash  for  his  note  of  $60  with  40c  interest. 
July    7     Chas.  Adams  pays  cash  for  his  note  of  $38.75  with  52c  interest. 
July  10     Pay  cash  for  your  note  of  $90,  dated  May  10,  with  $1.20  interest. 


48 


LOCKYEAR'S  BOOKKEEPING 


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Jan. 

2 

Jan. 

2 

Jan. 

6 

Jan. 

9 

Jan. 

11 

Jan. 

12 

LOCKYEAR'S    BOOKKEEPING  49 

Exercise  No.  14 

151.  In  this  exercise  you  are  to  keep  the  following  accounts:  Cash,  Mer- 
chandise, Expense,  Bills  Payable,  Bills  Receivable,  Interest  and  Discount,  J.  B. 
Reed,  W.  H.  Small  &  Co.,  Investment  account.  The  articles  handled  represent 
the  Seed  and  Grain  business.  Your  attention  should  be  directed  particularly  to 
the  transactions  involving  compound  entries. 

Seed  and  Grain  Transactions 

Jan.      2     Begin  business  with  cash  on  hand,  $800,  and  the  following  stock :  350  bu.  wheat, 
90  bu.  clover  seed,  250  bu.  oats,  400  bu.  corn,  the  total  value  being  $825. 

Note:  For  proper  entries  for  the  above,  see  Section  137,  Rule  "a,"  for  crediting 
Investment  account;  Section  104,  Rule  "a,"  for  debiting  Cash  account;  and  Section  106, 
Rule  "a,"  for  debiting  Merchandise  account. 

Pay  cash  for  rent  of  storeroom,  1  mo.,  $20. 
Buy  from  J.  B.  Regd,  on  account,  127  bu.  wheat  at  75c. 

Buy  from  A.  P.  Taylor,  800  bu.  wheat  at  80c  for  your  30-day  note  at  6  per  cent. 
Sell  to  W.  H.  Small  &  Co.,  on  account,  300  bu.  corn  at  60c. 
Sell  to  Jas.  Harter  for  his  30-day  note  at  6  per  cent,  60  bu.  clover  seed  at  $4. 
Pay  J.  B.  Reed  cash,  $94,  for  wheat  bought  on  Jan.  2,  a  discount  of  $1.25  being 
allowed. 

Note:  J.  B.  Reed's  account,  being  in  balance,  should  be  closed.  There  being  but  one 
item  on  either  side,  only  the  two-line  ruling  is  required.  It  is  not  necessary  to  write 
the  footings. 

Sell  to  Igleheart  Bros,  for  their  30-day  note  at  6  per  cent,  800  bu.  wheat  at  95c. 
W.  H.   Small  &  Co.  pay  cash,  $178,  in   full  of  account,  a  discount  of  $2  being 

allowed.     (Close  the  account.) 
Buy  from  Jas.  Barnes  160  bu.  clover  seed  at  $3  for  your  30-day  note  at  6  per  cent. 
Pay  drayage  bills  for  mo.,  $12.40. 

Buy  from  J.  B.  Reed,  on  account,  600  bu.  corn  at  45c. 
Pay  cash  for  rent  of  storeroom,  1  mo.,  $20. 

Pay  cash  for  your  note  in  favor  of  A.  P.  Taylor  with  interest. 
Sell  to  W.  H.  Small  &  Co.,  on  account,  200  bu.  oats  at  35c. 
Jas.  Harter  pays  cash  for  his  note  with  accrued  interest. 

Sell  to  E.  L.  Emerson  for  his  30-day  note  at  6  per  cent,  100  bu.  clover  seed  at  $4. 
Igleheart  Bros,  pay  cash  for  their  note  with  accrued  interest. 
Pay  to  J.  B.  Reed  $265  in  full  of  account,  a  discount  of  $5  being  allowed.      (Close 

the  account.) 
Buy  from  John  Martin  400  bu.  wheat  at  80c  for  your  30-day  note  at  5  per  cent. 
Pay  your  note  in  favor  of  Jas.  Barnes  with  accrued  interest. 
Buy  from  J.  B.  Reed,  on  account,  100  bu.  oats  at  30c. 
Pay  drayage  for  month  $9.80. 

Sell  to  E.  J.  Lawrence,  for  his  30-day  note  at  6  per  cent,  500  bu.  wheat  at  90c. 
Buy  from  W.  J.  Carter  300  bu.  wheat  at  70c,  for  your  30-day  note  at  6  per  cent. 
Pay  cash  for  rent  of  storeroom,  1  mo.,  $20. 
W.  H.  Small  &  Co.  pay  cash,  $68,  in  full  of  account,  a  discount  of  $2  being  allowed. 

(Close  the  account.) 


Jan. 

20 

Jan. 

21 

Jan. 

25 

Jan. 

30 

Feb. 

1 

Feb. 

1 

Feb. 

6 

Feb. 

10 

Feb. 

11 

Feb. 

19 

Feb. 

20 

Feb. 

24 

Feb. 

24 

Feb. 

25 

Feb. 

29 

Feb. 

29 

Mar. 

1 

Mar. 

2 

Mar. 

2 

Mar. 

4 

50  LOCKVEAR'S  BOOKKEEPING 

Mar.  12     Sell  W.  II.  Small  &  Co.,  on  account,  400  bu.  wheat  at  92c. 
Mar.  19     E.  L.  Emerson  pays  cash  for  his  note  with  accrued  interest. 

152.  Carry  out  the  following  instructions: 

(a)  Take  a  trial  balance  as  previously  instructed. 

(b)  Inventory  the  stock  on  hand  at  the  following  values:     wheat 

80c  per  bu.,  oats  30c  per  bu.,  corn  50c  per  bu.,  clover  seed 
$3.00  per  bu. 

(c)  Make  a  statement  as  previously  instructed. 
Hand  the  work  to  your  teacher. 

153.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher: 

(a)  When  you  pay  a  note  with  interest  why  should  Rills  Payable 

be  debited  for  the  face  instead  of  for  the  amount  of  the 
note? 

(b)  When  a  Rills  Receivable,  with  interest,  is  paid,  why  should 

the  account  be  credited  for  its  face  instead  of  for  the 
amount  ? 

(c)  What  is  a  Compound  entry? 

(d)  On  May  1st  you  buy  a  bill  of  mdse.  from  A.  J.  Black  amount- 

ing to  $85,  due  in  30  days.  On  May  5  he  accepts  $80 
in  settlement  of  the  account.  Illustrate  the  account  and 
explain  why  A.  J.  Rlack  should  be  debited  with  $85  instead 
of  the  amount  paid  him. 

(e)  Explain  why  the  "balance"  is  not  disturbed  by  such  an  entry 

as  is  required  by  the  transaction  under  "d." 


Tenth  Lesson 


Closing  the  Ledger 

154.  In  this  lesson,  the  method  of  closing  the  ledger  will  be  explained  and 
illustrated. 

Exercise  No.  15 

155.  In  this  exercise,  the  following  accounts  are  to  be  kept:  Cash,  Mer- 
chandise, Expense,  Bills  Payable,  Bills  Receivable,  Interest  and  Discount,  The 
Mackey-Nesbit  Company,  Parsons  and  Scoville  Company,  J.  B.  Reed,  C.  F. 
Packard,  Proprietor's  investment  account. 

156.  In  making  the  entries  in  the  various  ledger  accounts,  remember  that 
for  every  amount  debited,  a  corresponding  amount  is  credited  in  some  other 
account  or  accounts.  If  in  doubt,  as  to  the  proper  disposition  of  any  item,  refer 
to  the  rules  of  debit  and  credit  given  in  previous  lessons. 

Transactions  for  the  Exercise  in  Closing  the  Ledger 

July     1     You  are  to  begin  business  with  a  stock  of  general  merchandise  valued  at  $1,800, 

and  cash  $1,200. 
July     1     Pay  cash  for  store  rent  in  advance,  1  mo.,  $20. 
July     1     Buy  invoice  of  groceries,  on  account  30  days,   from  the    Parsons  &   Scoville   Co., 

$36070. 
July    2     Buy  from  the  Mackey-Nisbet  Co.,  on  account  30  days,  invoice  of   dry  goods  and 

notions,  $476.30. 
July    5     Cash  sales  for  this  day,  $12.75. 
July     5     Buy  from  the  Simmons  Hardware  Co.,  for  your  note,  invoice  of  hardware  amounting 

to  $127.40. 
July    5     Sell  to  J.  B.  Reed,  on  account,  groceries  amounting  to  $18.45. 
July    6     Sell  to  Jas.  Farley,  for  his  note,  dry  goods  and  groceries  amounting  to  $56.30. 
July    6     Cash  sales  for  this  day,  $9.70. 
July     7     Pay  cash,  $470,  for  the  bill  of  goods  bought  from  the  Mackey-Nisbet  Co.,  on  July  2, 

they  allowing  you  a  discount  of  $6.30. 
July    7     Buy  for  cash  3  tons  coal  at  $2.80  for  use  in  the  business. 
July    8     Buy  for  your  note  an  invoice  of  dry  goods  from  Marshall  Field  &  Co.,  amounting 

to  $190. 
July    8    Sell  to  C.  F.  Packard,  on  account,  dry  goods  and  groceries  amounting  to  $38.40. 

51 


52  LOCKYEAR'S  BOOKKEEPING 

July    8    Pay  the  Parsons  &  Scoville  Co.,  cash  on  account,  $100. 

July  9  Buy  from  the  Mackey-Nisbet  Co.,  on  account  30  days,  an  invoice  of  goods  amount- 
ing to  $75.80. 

July    9    Receive  from  J.  B.  Reed,  cash  to  apply  on  account,  $10. 

July    9     Cash  sales  for  the  day  $11.80. 

July  11  Buy  from  the  Parsons  &  Scoville  Co.,  on  account  30  days,  an  invoice  of  groceries 
amounting  to  $87.40. 

July  12     Pay  the  Parsons  &  Scoville  Co.,  cash  to  apply  on  account,  $260.70. 

July  12     Sell  to  C.  A.  Roberts,  for  his  note,  dry  goods  amounting  to  $27. 

July  12     Cash  sales  for  this  day,  $25.40. 

July  12     Sell  to  J.  B.  Reed,  on  account,  dry  goods  and  groceries  amounting  to  $27.40. 

July  13     C.  F.  Packard  pays  cash  to  apply  on  account,  $20. 

July  14     Sell  to  C.  F.   Packard,  on  account,  dry  goods  and  groceries  amounting  to  $36.90. 

July  14  Pay  your  note  of  July  5  for  $127.40,  in  favor  of  the  Simmons  Hardware  Co.,  with 
interest  90c. 

July  15  Buy  from  the  Parsons  &  Scoville  Co.,  on  account  30  days,  an  invoice  of  groceries 
amounting  to  $39.30. 

July  15     Cash  sales  for  the  day,  $40.75. 

July  16     Cash  sales  for  the  day,  $28.75. 

July  18    Sell  to  A.  L.  Jones,  for  his  note,  dry  goods  and  groceries  amounting  to  $38.60. 

July  19  Pay  cash,  $85,  for  invoice  of  groceries  bought  from  the  Parsons  &  Scoville  Co.,  on 
July  11,  a  discount  of  $2.40  being  allowed. 

July  19     Sell  for  cash,  merchandise  amounting  to  $38.45. 

July  20    Jas.  Farley  pays  his  note  of  $56.30,  dated  July  6,  interest  $1.20. 

July  20     Pay  cash,  $7.80,  for  books  and  stationery  for  office  use. 

July  20     Sell  to  J.  B.  Reed,  on  account,  dry  goods  and  merchandise  amounting  to  $37.80. 

July  21     Sell  for  cash  merchandise  amounting  to  $17.80. 

July  22    C.  F.  Packard  pays  cash  in  full  of  account,  you  allowing  a  discount  of  $1.50. 
Rule  the  account.     Balance  and  rule  your  Cash  account. 

July  23     Sell  to  C.  F.  Packard,  on  account,  merchandise  amounting  to  $28.45. 

July  25  Buy  for  your  note  an  invoice  of  hardware  from  the  Clifford  Hardware  Co.  to  the 
amount  of  $70. 

July  25  Pay  cash  for  your  note  of  $190  in  favor  of  Marshall  Field  &  Co.,  with  $1.80 
interest. 

July  25  Buy  from  the  Mackey-Nisbet  Co.,  on  account  30  days,  an  invoice  of  goods  amount- 
ing to  $74.20. 

July  26  Pay  cash,  $74,  for  the  invoice  of  goods  bought  from  the  Mackey-Nisbet  Co.,  on 
July  9,  a  discount  of  $1.80  being  allowed. 

July  26    C.  A.  Roberts  pays  cash,  $26,  for  his  note,  a  discount  of  $1  being  allowed. 

157.     Carry  out  the  following  instructions: 

(a)  Take  a  trial  balance. 

(b)  Assuming  that  the  inventory  shows  $3,200  worth  of  merchan- 

dise on  hand,  determine  your  resources. 

(c)  Determine  your  liabilities. 

(d)  From  these  facts  determine  your  present  worth. 


LOCKYEAR'S  BOOKKEEPING  53 

(<?)     Determine  your  total  gain. 

(/)      Determine  your  loss. 

(g)     Determine  your  net  gain. 

(h)      From  these  facts  determine  your  present  worth. 

(i)  Make  a  statement  using  the  form  shown  in  the  Seventh  Les- 
son, Section  101. 

(/)  Hand  the  accounts,  the  trial  halance,  and  the  statement  to 
your  teacher. 

Classification  of  Accounts 

158.  You  have,  no  doubt,  observed  that  an  account  shows  either  a  resource, 
a  liability,  a  loss  or  a  gain.  On  this  basis,  accounts  are  divided  into  two  general 
classes,  namely : 

(a)  Real  accounts,  those  showing  resources  or  liabilities. 

(b)  Speculative  accounts,  those  showing  losses  or  gains. 

Examples  of  the  first  class  are :  Cash,  Bills  Receivable,  Bills  Payable,  and 
Personal  accounts.  The  second  class  are  illustrated  by  Expense,  Interest  and 
Discount,  and  Merchandise  accounts. 

Closing  the  Ledger 

159.  You  have  also  observed  that  the  following  steps  are  taken  in  deter- 
mining the  proprietor's  present  worth  : 

(a)  The  total  gain  is  determined. 

(b)  The  total  loss  is  determined. 

(c)  The  net  gain  or  net  loss    is  determined. 

(d)  The  net  gain  or  net  loss      is  added    to,    or    deducted    from, 

the  former  present  worth. 

160.  The  steps  outlined  in  the  preceding  section  show  precisely  what  is 
done  in  closing  the  ledger  (a  very  simple  matter),  but  the  utmost  caution  must 
be  used,  else  the  mechanical  part  of  it  will  be  confusing. 

161.  With  your  statement  before  you,  proceed  to  close  your  ledger  in 
accordance  with  the  following  instructions. 

162.  Close  the  Expense  account  as  shown  in  Illustration  No.  27.  Observe 
that  the  loss  is  written  in  red  ink,  which  signifies  that  it  is  to  be  transferred  to 
another  account. 

163.  Next,  open  an  account  under  the  title  of  "Loss  and  Gain,"  and  transfer 
the  loss  shown  by  the  Expense  account  to  the  debit  side,  as  shown  in  Illustra- 
tion No.  30. 


54  LOCKYEAR'S  BOOKKEEPING 

164.  Observe  that  when  the  $36.20  is  written  on  the  credit  side  of  Expense 
account,  your  ledger  is  out  of  balance,  as  this  amount  now  has  no  corresponding 
debit.  By  transferring  the  amount  $36.20  to  the  debit  side  of  the  "Loss  and 
Gain"  account,  the  balance  of  the  ledger  is  restored. 

165.  To  indicate  the  page  to  which  or  from  which  an  item  is  transferred, 
place  the  page  number  in  the  folio  column.  For  instance,  if  Expense  account 
is  found  on  page  "20"  of  the  ledger,  and  the  "Loss  and  Gain"  account  on  page 
"30,"  you  would  write  the  number  "30"  in  the  folio  column  of  Expense  account, 
and  in  the  folio  column  of  the  "Loss  and  Gain"  account,  you  would  write  the 
number  "20." 

166.  Close  the  Interest  and  Discount  account  as  shown  in  Illustration 
No.  28. 

167.  Transfer  the  gain  from  the  Interest  and  Discount  account  to  the  credit 
side  of  the  "Loss  and  Gain"  account,  as  shown  in  Illustration  No.  30. 

168.  Close  the  Merchandise  account  as  follows: 

(a)  Write  the  inventory  on  the  credit  side  in  red  ink,  as  shown  in 

Illustration  No.  29. 

(b)  Write  the  gain  on  the  debit  side  in  red  ink  as  shown  in  Illus- 

tration No.  29. 

(c)  Rule  the  account,  and  bring  the  inventory  below  the   ruling 

on  the  debit  side,  as  shown  in  Illustration  No.  29. 

(d)  Transfer  the  gain  to  the  credit  side  of  the  "Loss  and  Gain" 

account,  as  shown  in  Illustration  No.  30. 
You  will  now  observe  that  all  the  Speculative  accounts,  that  is,  those  show- 
ing losses  and  gains  have  been  closed,  the  gains  having  been  carried  to  the  credit 
side  and  the  losses  to  the  debit  side  of  the  "Loss  and  Gain"  account. 

169.  The  net  result  of  the  business,  shown  on  the  statement,  and  now  also 
by  the  "Loss  and  Gain"  account  in  the  ledger,  must  finally  appear  in  the  Pro- 
prietor's account.  The  "Loss  and  Gain"  account  furnishes  a  convenient  means 
for  showing  the  net  gain  or  net  loss  in  a  single  amount,  preparatory  to  trans- 
ferring to  the  Proprietor's  stock  account. 

170.  You  will  now  close  the  "Loss  and  Gain"  account  by  writing  the  dif- 
ference between  the  two  sides,  the  net  gain,  in  red  ink  on  the  debit  side,  as  shown 
in  Illustration  No.  30. 

171.  Transfer  the  net  gain  to  your  Investment  account,  and  balance  it,  as 
shown  in  Illustration  No.  31. 

With  your  statement  before  you,  trace  the  steps  taken  in  closing  the  ledger 
until  you  thoroughly  understand  the  manner  of  doing  it. 


LOCKYEAR'S    BOOKKEEPING 


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LOCK  YEAR'S    BOOKKEEPING 


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Illustration  No.  31 


The  Second  Trial  Balance 

172.  After  the  books  have  been  closed,  it  is  advisable  to  take  a  second  trial 
balance  to  prove  that  you  have  not  omitted  to  bring  down  inventories  or  made 
any  other  errors  in  closing,  which  would  put  the  ledger  "off  balance." 

173.  The  second  trial  balance  is  a  list  of  all  the  accounts  in  the  ledger  after 
it  has  been  closed.  It  will  be  observed  that  aside  from  the  Proprietor's  stock 
account,  the  remainder  of  the  accounts  now  found  in  the  ledger  represent  either 
a  resource  or  a  liability.  All  the  speculative  accounts  were  disposed  of  in  the 
process  of  closing  the  ledger. 

174.  Hand  your  work  to  the  teacher  for  examination.  Answer  the  follow- 
ing questions  in  writing  and  hand  to  your  teacher : 

(a)  State  how  the  gain  on  merchandise  is  determined  when  there 
is  an  inventory. 

Speculative  accounts  are  kept  for  what  purpose? 

What  is  the  purpose  of  the  Loss  and  Gain  account? 

State,  in  logical  order,  the  steps  that  are  taken  in  closing  the 
ledger. 

Which  is  the  last  account  to  be  closed? 

State  the  two  ways  of  finding  your  present  worth. 

If  your  liabilities  exceed  your  resources,  what  is  the  differ- 
ence called  ? 

On  which  side  of  the  Loss  and  Gain  account  do  your  losses 
appear  after  the  ledger  is  closed?  On  which  side  are  the 
grains? 


(&) 

(0 

(d) 

(«) 

(/) 
(9) 

(A) 


Eleventh  Lesson 


The  Journal 

175.  Up  to  this  point  the  work  has  dealt  with  the  individual  accounts,  it 
having  been  the  primary  purpose  to  develop  the  manner  of  keeping  accounts  and 
the  purpose  for  which  each  is  kept.  In  connection  with  this  the  Trial  Balance 
and  Statement  have  been  developed,  and  through  the  whole  has  been  revealed 
the  purpose  for  which  a  set  of  books  is  kept.  You  must  ever  keep  in  mind  that 
each  account  has  a  purpose  peculiar  to  itself,  setting  out  a  fact  necessary  for  the 
proprietor  to  know ;  and  that  from  all  the  accounts  are  deduced  certain  other 
facts  equally  necessary  to  be  known,  they  being  set  out  in  the  Statement. 

176.  From  all  that  has  gone  before  it  is  clear  that  the  purpose  of  a  set  of 
books  is  to  furnish  to  the  proprietor  the  facts  from  which  he  can,  at  any  time, 
ascertain  the  true  condition  of  the  business.  The  resources  of  the  business  and 
what  they  consist  of,  the  liabilities,  the  cost  of  conducting  the  business,  the  sources 
of  profit,  and  the  amount  of  money  on  hand,  are  all  shown  by  a  set  of  double 
entry  books. 

177.  It  is  possible  in  any  business  to  show  the  facts  referred  to  above,  by 
keeping  detached  accounts  as  you  have  done  in  the  preceding  lessons.  However, 
books  of  original  entry,  known  as  the  Journal,  Cash  Book,  Sales  Book,  etc.,  are 
used  in  which  to  record  a  detailed  history  of  each  transaction,  and  from  these 
books  the  amounts  are  transferred  to  the  proper  accounts  in  the  ledger. 

178.  In  this  lesson,  the  manner  of  making  entries  in  the  Journal  will  be 
fully  illustrated.  Observe  that  the  third  column  at  the  left  of  the  page  is 
the  folio  column.  The  wide  space  contains  the  names  of  the  accounts  to  be 
debited  and  credited  and  also  a  brief,  but  complete,  explanation  or  history  of  the 
transaction.  The  money  columns  are  side  by  side.  The  one  on  the  left  is  the 
debit  and  the  one  on  the  right,  the  credit  column. 

179.  The  original  entry  or  first  record  of  a  transaction  must  be  made  with 
care  as  it  is  the  one  by  which  the  transaction  is  proved.  Erasures  are  not  per- 
mitted, as  this  would  vitiate  the  record  and  make  it  inadmissible  as  evidence  in 
court.  To  rectify  errors  in  writing  figures  in  books  of  original  entry,  draw  a 
single  red  line  through  the  incorrect  amount  and  write  the  correct  figures  above. 
If  the  whole  entry  is  wrong,  mark  it  ''void"  in  red  ink  and  re- write. 

57 


58 


LOCKYEAR'S  BOOKKEEPING 


180.  A  careful  study  of  the  following  transactions  and  the  illustrations 
of  the  model  entries  will  enable  you  to  thoroughly  understand  the  use  of  the 
Journal. 

Transactions  Illustrating  the  Use  of  the  Journal 

Feb.    1     A.   C.   Simmons,   commenced  the  retail   furniture  business  on   this   date,   investing 

cash,  $4,000. 
Feb.    2     Bought  from  Alexander  H.  Revell  &  Co.,  on  account  60  days,  invoice,  dated  Feb.  1, 

amounting  to  $1,496.70. 
180a.     An  invoice  is  an  itemized  list  of  the  articles  bought,  showing  prices, 
discounts  and  terms  of  purchase. 


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LOCKYEAR'S    BOOKKEEPING 


59 


Feb.  2 

Feb.  3 

Feb.  4 

Feb.  4 

Feb.  8 


Mar. 

Mar. 


Sold  to  J.  B.  Corwin,  on  account  30  days,  one  Oak  Dresser,  $47.50. 

Sold  to  Samuel  Lee  for  cash,  2  China  Closets  at  $21.25;  12  Oak  Chairs  at  $1.25; 

1  Colonial  Dining  Table  at  $45. 
Bought  from  the  Tobey  Furniture  Co.,  Chicago,  invoice  dated  Feb.  3,  amounting  to 

$640,  and  gave  in  payment  a  thirty-day  note  with  interest  at  6  per  cent. 
Sold  to  Otis  L.   Matthews  the  following  bill  of  goods  and  received  in  payment, 

cash,  $100,  and  his  note  at  one  month  with  interest  at  6  per  cent  for  the  balance : 

3  Chiffoniers  at  $22;  3  Oak  Dressers  at  $45;  18  Oak  Chairs  at  $1.25. 
J.  B.  Corwin  paid  cash  for  goods  bought  on  the  2d,  but  not  due  until  March  4. 

He  is  allowed  a  discount  of  $1.50. 
Received  cash  from  Otis  L.  Matthews  for  his  note  due  to-day,  also  interest,  62c. 
Paid  Tobey  Furniture  Co.  cash  for  note  given  on  Feb.  4,  together  with  interest,  $3.20. 


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60  LOCKYEAR'S  BOOKKEEPING 

181.  In  making  entries  in  the  Journal,  the  same  process  of  reasoning  is 
employed  as  in  the  case  of  detached  accounts.  You  have  learned  when  to  debit 
and  when  to  credit  the  various  accounts.  The  same  rules  are  applied  in  making 
the  journal  entries.  The  name  of  the  account  to  be  debited  is  written  first  with 
the  amount  in  the  debit  column  on  the  same  line.  The  name  of  the  account  to 
be  credited  is  written  on  the  line  below  the  debit  item,  but  a  little  to  the  right,  and 
the  amount  is  entered  in  the  credit  column  on  the  same  line.  The  explanation 
of  the  transaction  is  written  below,  using  the  whole  space  for  this  purpose. 
Always  write  the  name  of  the  month  and  the  date  at  the  top  of  each  page.  In 
the  middle  of  the  page  write  only  the  date,  except  where  the  month  changes. 
When  several  transactions  occur  on  the  same  day,  write  the  date  above  ihe  first 
only  and  leave  a  blank  line  between  each  transaction. 

Posting 

182.  Posting  is  the  process  of  transferring  the  amounts  from  the  original 
book  of  entry  to  their  respective  accounts  in  the  ledger.  In  business,  posting 
should  be  done  daily. 

183.  As  a  means  of  avoiding  errors  it  is  advisable  to  post  all  debit  items 
first,  and  in  the  order  in  which  they  appear  in  the  Journal ;  next  post  all  credit 
items,  and  in  the  order  in  which  they  appear  in  the  Journal. 

184.  The  following  details,  if  carefully  studied,  will  make  clear  the  manner 
of  posting.  A  Cash  account  being  opened  in  the  ledger,  these  steps  were  taken 
in  posting  the  first  debit  item : 

(a)  The  item,  $4,000  was  transferred  to  the  debit  side  of  the  account. 

(b)  The  date  of  the  journal  entry  was  transferred  to  the  ledger. 

(c)  The  journal  page  was  transferred  to  the  folio  column  in  the  ledger. 

(d)  The  ledger  page  was  transferred  to  the  folio  column  in  the  Journal. 

Note:     In  posting,  be  sure  to   follow   the  above   directions  in   the   order   in   which   they 
are  stated. 

185.  The  illustrations  on  the  next  page  show  the  result  of  Posting  the 
journal  entries  to  their  proper  accounts  in  the  ledger.  Examine  them  care- 
fully to  make  certain  that  you  understand  the  four  steps  necessary  hi  posting 
an  item. 

Checking  the  Posting 

186.  The  careful  bookkeeper  checks  his  posting  to  guard  against  possible 
errors.  While  it  will  require  a  little  extra  work  to  do  this,  it  is  better  than 
worrying  many  extra  hours  at  the  end  of  the  month  in  trying  to  find  mistakes  in 


LOCKVKAR'S    BOOKKEEPING 


61 


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62 


LOCKYEAR'S  BOOKKEEPING 


your  trial  balance  that  could  have  been  avoided  by  a  careful  system  of  checking. 
The  following  directions  will  show  the  manner  of  checking  your  posting  properly 
and  systematically. 

187.  Beginning  with  the  first  debit  item  in  the  Journal,  see  if  it  is  properly 
written  and  in  its  proper  place  in  the  ledger;  if  you  find  it  so,  check  it  by  placing 
the  following  mark  (V)  near  the  two-line  ruling  just  to  the  left  of  the  item  in 
the  ledger,  and  also  near  the  two-line  ruling  just  to  the  left  of  the  item  in  the 
Journal.  All  debit  items  must  be  checked  first  and  then  the  credit  items.  The 
first  page  of  journal  entries  are  checked  in  the  model  Journal  and  in  the  proper 
ledger  accounts.     Examine  them  in  both  the  Journal  and  the  ledger. 

Exercise  No.  16 

188.  You  are  to  engage  in  the  Dry  Goods  Business  with  a  cash  investment 
of  $3,500.  Write  an  opening  entry  similar  to  the  one  in  Illustration  No.  32  and 
journalize  the  transactions  given  below. 


June 

1 

June 

1 

June 

2 

June 

2 

June 

5 

June 

5 

June 

9 

June 

9 

June 

13 

June 

17 

June 

23 

June 

27 

June 

30 

July 
July 
July 
July 
July 
July 

1 

1 

2 
5 
5 
9 

July 
July 

13 

15 

Dry  Goods  Transactions 

Amount  of  cash  on  hand,  $3,500. 

Buy  900  yds.  Venetian  cloth  from  A.  J.  Barnes  at  80c,  and  give  in  payment  your 

30-day  note  at  6  per  cent. 
Pay  1  month's  rent  in  advance,  $20. 

Buy  from  E.  C.  Hawley,  on  account,  30  yds.  broadcloth  at  $3.25. 
Buy  for  cash  1,200  yds.  China  silk  at  40c. 

Sell  to  Jas.  Barker,  for  his  30-day  note  at  6  per  cent,  700  yds.  Venetian  cloth  at  90c. 
Pay  cash  for  hired  help,  $12. 

Buy  from  E.  C.  Hawley,  on  account,  600  yds.  storm  serge  at  35c. 
Buy  1,200  yds.  Venetian  cloth  from  E.  J.  Lawrence  at  85c,  and  give  in  payment 

your  30-day  note  at  6  per  cent. 
Sell  to  W.  H.  Small  &  Co.,  on  account,  650  yds.  Venetian  cloth  at  90c. 
Pay  cash,  $300,  to  E.   C.   Hawley,  in  full  of   account,   a  discount  of  $7.50  being 

allowed. 
Sell  to  M.  J.  Harman,  for  his  30-day  note  at  6  per  cent,  800  yds.  China  silk  at  55c. 
Buy  from  E.  C.  Hawley,  on  account,  28  yds.  broadcloth  at  $3.30. 
Sell  to  W.  H.  Small  &  Co.,  on  account,  24  yds.  broadcloth  at  $4. 
Pay  cash  for  your  note  in  favor  of  A.  J.  Barnes,  with  accrued  interest. 
Pay  a  month's  rent  in  advance. 

W.  H.  Small  &  Co.  settle  their  account  in  full,  a  discount  of  $6  being  allowed. 
Jas.  Barker  pays  cash  for  his  note,  due  this  date,  with  accrued  interest. 
Buy  108  yds.  broadcloth  from  E.  J.  Hopkins  at  $3.40,  and  give  in  payment  your 

30-day  note  at  6  per  cent. 
Pay  cash  for  your  note  in  favor  of  E.  J.  Lawrence,  with  accrued  interest. 
Pay  E.  C.  Hawley  $25  to  apply  on  account. 


LOCKYEAR'S  BOOKKEEPING  63 

July   18  Sell  to  Geo.  Caxton  &  Co.,  for  their  30-day  note  at  6  per  cent,  85  yds.  broadcloth 

at  $4.60. 

July    18  Pay  freight  on  above,  $8. 

July   23  Buy  from  E.  J.  Andrews,  400  yds.  China  silk  at  48c,  and  give  in  payment  your 

30-day  note  without  interest. 

July   25  Sell  to  S.  \V.  Little,  on  account,  200  yds.  storm  serge  at  48c. 

July   27  Pay  cash,  $100,  on  your  note  in  favor  of  E.  J.  Andrews. 

July   27  M.  J.  Harmon  pays  his  note  due  this  date,  with  accrued  interest. 

July   29  Sell  to  W.  H.  Small  &  Co.,  on  account,  350  yds.  China  silk  at  52c. 

Aug.     1  Sell  to  S.  W.  Little,  on  account,  100  yds.  China  silk  at  57c. 

Aug.     1  Buy  from  E.  C.  Hawley,  on  account,  250  yds.  China  silk  at  44c. 

Aug.    3  Receive  cash,  $50,  from  S.  W.  Little,  to  apply  on  account. 

Aug.    4  Buy  800  yds.  China  silk  from  Chas.  Adams  at  47c,  and  give  in  payment  your  30-day 

note  at  6  per  cent. 

Aug.    4  Buy  from  E.  C.  Hawley,  on  account,  10  yds.  broadcloth  at  $3.90. 

Aug.    8  Pay  cash  for  hired  help,  $16. 

Aug.    9  Pay  your  note  in  favor  of  E.  J.  Hopkins,  due  this  date,  with  accrued  interest. 

Aug.  12  Sell  to  M.  C.  Bailey,  for  his  30-day  note  at  6  per  cent,  700  yds.  China  silk  at  59c. 

Aug.  13  Receive  cash,  $40,  from  W.  H.  Small  &  Co.,  to  apply  on  account. 

Aug.  15  Sell  to  S.  W.  Little,  on  account,  80  yds.  storm  serge  at  42c. 

Aug.  15  Sell  to  W.  H.  Small  &  Co.,  on  account,  350  yds.  Venetian  cloth  at  $1.01. 

Aug.  18  Geo.  Caxton  &  Co.,  pay  cash  for  their  note,  due  this  date,  with  accrued  interest. 

Aug.  20  S.  W.  Little  pays  cash,  $40,  to  apply  on  account. 

Aug.  23  Pay  balance  due  on  your  note  in  favor  of  E.  J.  Andrews. 

189.  Carry  out  the  following  instructions : 

(a)  Have  the  journal  entries  verified  by  your  teacher. 

(b)  Post  the  above,  using  sheets  of  ledger  paper. 

(c)  Verify  your  posting  by  checking  as  directed  in  Section  187. 

(d)  Take  a  trial  balance. 

(e)  Inventory  the  Venetian  cloth  on  hand   at  90c  per  yd.,  the 

China  silk  at  40c  per  yd.,  the  storm  serge  at  35c  per  yd., 

and  the  broadcloth  at  $3.40  per  yd.     Have  the  inventory 

verified. 
(/)     Make  a  statement.     Have  it  verified. 
(g)     Close   the  ledger,    following  the   steps    stated   in   the   Tenth 

Lesson,  Sections  159  to  171. 
(h)     Hand  the  Journal,  Ledger,  Trial  Balance  and  Statement  to 

your  teacher. 

190.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher: 

(a)  What  is  meant  by  posting? 

(b)  What  is  a  book  of  original  entry? 

(c)  What  advantages  are  afforded  by  the  use  of  the  Journal? 


64  LOCKYEAR'S  BOOKKEEPING 

(d)     Explain   in  detail  the  method   of  posting  an   item   from   the 

Journal  to  the  ledger.- 
(c)     What  is  the  object  of  checking  the  posting? 
(/)      Why  are  erasures  in  books  of  original  entry  not  permitted? 
(g)     How   should  errors  be  corrected   in   writing   wrong   figures? 
(h)     How   do  you  correct  an   error  made  by   writing  the   wrong 

amount  in   the  ledger  money  column? 


Twelfth  Lesson 


The  Cash  Book 

191.  A  book  of  original  entry  is  one  containing  the  first  record  of  all  the 
facts  concerning  business  transactions. 

192.  The  Cash  Book,  like  the  Journal,  is  a  book  of  original  entry.  All 
transactions  involving  cash  are  recorded  in  this  book  and  posted  direct  to  the 
ledger.  While  the  method  of  making  the  entry  in  this  book  is  new  to  you,  keep 
in  mind  that  the  same  rules  of  debit  and  credit  which  you  have  already  learned 
and  applied  are  still  effective.     These  rules  never  change. 

193.  You  will  learn  as  you  proceed  with  this  course  of  study  that  there 
are  various  kinds  of  books  of  original  entry.  Remember  that  while  the  principles 
of  Double  Entry  bookkeeping  are  always  the  same,  their  application  and  the 
form  of  the  books  used  vary  according  to  the  requirements  of  the  business. 

194.  The  simplest  form  of  the  Cash  Book  is  illustrated  by  the  transactions 
given  below. 

You  will  see  by  referring  to  the  transactions  and  the  illustrations  that  all 
cash  received  is  placed  on  the  left-hand,  that  is  the  debit  side,  of  the  Cash  Book. 

You  will  also  observe  that  all  cash  paid  out  for  any  purpose  is  placed  on 
the  right-hand,  that  is  the  credit  side,  of  the  Cash  Book. 

195.  From  the  foregoing  you  have  probably  noted  that  the  Cash  Book 
does  not  differ  much  from  the  Cash  account,  except  in  its  form.  When  a  Cash 
Book  is  used,  it  takes  the  place  of  the  Cash  account;  therefore,  it  is  not  necessary 
to  open  that  account  in  the  ledger. 

196.  You  will  make  the  entries  for  the  following  transactions  exactly  as 
they  appear  in  the  model  Cash  Book.  Take  a  double  sheet  of  journal  paper  and 
number  each  page  at  the  top.  When  open,  page  2  will  be  the  left-hand  side, 
and  page  3  the  right-hand  side. 

Transactions  Illustrating  the  Use  of  the  Cash  Book 

Jan.  2     L.  H.  Burke  began  business  on  this  date  investing  cash,  $3,000. 

197.  You  have  already  learned  that  this  transaction  requires  that  cash  should 
be  debited  and  L.  H.  Burke  credited.     Cash  being  received,  the  entry  must  be 

65 


66 


LOCKYEAR'S  BOOKKEEPING 


made  on  the  debit  side  or  "cash  received"  side  of  the  Cash  Book.  This  is  done 
by  writing  the  name  of  the  account  to  be  credited  "L.  H.  Burke,"  immediately  to 
the  right  of  the  date  column,  following  it  with  a  brief  explanation,  and  the 
amount,  $3,000,  in  the  first  money  column.  When  this  amount  is  posted,  it  will 
appear  on  the  credit  side  of  L.  H.  Burke's  account  in  the  ledger. 

Jan.     2    Bought  a  stock  of  merchandise  from  A.  M.  Harris  and  gave  him  in  payment  $1,500 
cash. 

198.  This  entry  requires  that  Merchandise  account  should  be  debited  and 
cash  credited.  Enter  it  on  the  credit  side  of  the  Cash  Book,  by  writing  the  name 
of  the  account  to  be  debited,  "Merchandise,"  immediately  to  the  right  of  the  date 
column  followed  with  a  brief  explanation,  and  the  amount,  $1,500,  in  the  first 
money  column.  This  amount  will  be  posted  to  the  debit  side  of  the  Merchandise 
account  in  the  ledger. 


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Jan.  3  Paid  cash  for  January  rent,  $50.00. 

Jan.  5  Sold  merchandise  to  A.  C.  Loring,  for  cash  $200. 

Jan.  8  Paid  cash  for  repairs  on  building,  $25.00. 

Jan.  8  R.  G.  Mann  paid  cash,  to  apply  on  account,  $250. 

Jan.  10  Paid  cash  for  stamps  $5.00,  office  stationery  $15. 


LOCKYEAR'S  BOOKKEEPING 


67 


Jan.  12  Sold  merchandise  for  cash,  $130. 

Jan.  13  Paid  cash  for  merchandise  valued  at  $70.00. 

Jan.  15  Paid  cash  for  labor  $9.00. 

Jan.  15  Mr.  Burke  took  cash  from  drawer,  for  personal  use,  $30.00. 

It  is  now  desired  to  balance  the  Cash  Book  in  order  to  show  in  a  single  sum 
the  amount  of  cash  on  hand.  Study  carefully  the  method  of  doing  this  as  shown 
in  the  illustration.  After  bringing  down  the  balance,  proceed  with  the  following 
transactions : 

Jan.  17  Received  cash  from  Leonard  B.  Innis,  in  payment  of  note  due  to-day,  $470.00. 

Jan.  28  Paid  my  note  for  $100.00,  favor  of  R.  M.  Lee,  and  interest  on  it  amounting  to  $8.00. 

Jan.  20  Cash  sales  of  merchandise  for  the  day,  $230.00. 

Jan.  23  Alfred  Cole  paid  his  note  for  $150,  due  to-day;  also  interest  amounting  to  $3.50. 

Jan.  24  Gave  Henry  Brown  check  for  $62.50  in  full  of  account. 

Jan.  25  Received  cash  for  merchandise,  $190.75. 


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199.     Deductions  made  from  the  foregoing  transactions : 

(a)  Making  the  entries  on  the  left-hand  side  of  the  Cash  Book 
as  shown  in  Illustration  No.  34  has  the  same  effect  as  a 
journal  entry  debiting  cash  and  crediting  the  person  or 
thing  producing  the  money. 


68  LOCKYEAR'S  BOOKKEEPING 

(b)  The   entries   on    the    right-hand    side    equal    a   journal    entry 

debiting  the  person  to  whom  or  the  thing  for  which  the  cash 
was  paid,  and  crediting  "Cash." 

(c)  The  use  of  the  Cash  Book   saves  the  time  and  labor  which 

would  otherwise  be  required  in  writing  the  word  "Cash"  in 
every  transaction  if  made  in  the  Journal,  and  it  also  does 
away  with  the  work  of  posting  to  a  Cash  account  in  the 
ledger. 

(d)  The  difference  between  the  two  sides  of  the  Cash  Book  will 

show  the  amount  of  cash  on  hand. 

Posting  from   the  Cash  Book 

200.  You  are  now  to  post  the  work  of  your  Cash  Book,  using  sheets  of 
ledger  paper  for  this  purpose. 

201.  First,  post  the  items  found  on  the  left-hand  side  of  the  Cash  Book. 
Open  an  account  with  "L.  H.  Burke,  Proprietor,"  at  the  top  of  the  first  page 
of  your  ledger  sheet,  numbering  the  page  1. 

202.  Observe  the  following  order  of  procedure  in  posting : 

(a)  Write  the  amount,  $3,000,  in  the  money  column  on  the  credit 

side  of  L.  H.  Burke's  account. 

(b)  Write   the   date   of   the   Cash    Book   transaction    in   the   date 

column. 

(c)  Write  the  page  of  the  Cash  Book  in  the  ledger  folio  column; 

also  write  the  letter  "C*  immediately  to  the  left  of  the  folio 
column  to  indicate  that  this  item  is  posted  from  the  Cash 
Book. 

(d)  Next,  write  the  page  of  the  ledger  account  in  the  folio  column 

of  the  Cash  Book,  to  show  that  the  item  has  been  posted, 
and  also  where  it  may  be  found  in  the  ledger. 
Complete  the  posting  of  the  items  on  the  debit  side  of  the  Cash  Book.    Then 

post  from  the  credit  side,  remembering  that  each  item  will  be  posted  to  the  debit 

side  of  the  proper  ledger  account. 

203.  To  prove  your  posting,  take  a  trial  balance  of  your  ledger  and  arrange 
it  in  proper  form  on  a  sheet  of  journal  paper.  Hand  your  Cash  Book,  Ledger 
accounts,  and  Trial  Balance  to  your  teacher  for  approval. 

Exercise  No.  17 

204.  Record  the  following  transactions  in  proper  Cash  Book  form. 


LOCKYEAR'S    BOOKKEEPING  69 

Jewelry  Transactions 

Mar.  1  H.  C.  Tilton  began  business  with  $1,500,  cash. 

Mar.  1  Paid  rent  for  March,  $35. 

Mar.  2  Bought  merchandise  for  cash,  $1,000. 

Mar.  3  Sold  for  cash  6  sets  Individual  Salad  Forks  at  $5.40. 

In  this  and  similar  transactions,  make  the  entry  in  the  explanation  column,  as 
follows:     "Mdse.  6  sets  I.  S.  F.  at  $5.40." 

Mar.  4  Paid  R.  C.  Brown  cash  to  apply  on  account,  $150. 

Mar.  6  Sold  for  cash  3  Stag  Handle  Carving  Sets  at  $18.90. 

Mar.  6  Received  $250  cash  from  James  A.  Monroe  on  account. 

Mar.  7  Paid  $5.40  cash  to  City  Express  Co.  for  hauling. 

Mar.  8  Samuel  Lathrop  paid  cash  for  his  note  in  our  favor,  due  to-day,  $375. 

Mar.  9  Paid  cash  for  repairs  on  furniture,  $3. 

Balance  and  rule  the  Cash  Book. 

Mar.  10  Sold  one  Oak  Hall  Clock  for  cash,  $114.75. 

Mar.  11  Paid  cash  for  my  note  due  to-day  favor  of  Bernhard  &  Co.,  $450.00,  together  with 

interest,  $3.25. 

Mar.  14  Bought  for  cash  invoice  of  goods  amounting  to  $165. 

Mar.  15  Sold  for  cash  ^  gross  Gold  Filled  Fobs,  at  $5.90  a  doz. 

Mar.  16  Paid  freight  on  goods  bought  on  the  16th,  $9.83. 

Mar.  17  Arthur  Lee  paid  $5.70  cash  for  interest  due  to-day  on  a  note  we  hold  against  him. 

Mar.  20  Sold  for  cash  2  Gold  Filled  Watches,  at  $40.70. 

Mar.  24  Paid  wages  to  clerks,  $70. 

Mar.  26  Sold  for  cash  3  sets  Bouillon  Spoons,  at  $6. 

205.  Directions  for  proceeding  with  the  work : 

(a)  Have  the  entries  verified  by  the  teacher. 

(b)  Balance  the  Cash  Book. 

(c)  Post  to  the  proper  ledger  accounts. 

(d)  Take  a  trial  balance. 

(e)  Hand  your  work  to  the  teacher  for  inspection. 

206.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher : 

(a)      For  what  purpose  is  the  Cash  Book  kept? 

(d)     How  is  the  balance  of  cash  on  hand  determined? 

(c)  Explain  in  what  way  the  use  of  the  Cash  Book  reduces  the 

work  of  the  bookkeper. 

(d)  Explain  how  the  books  are  kept  in  balance  when  the  debit 

and  credit  items  in  the  Cash  Book  are  posted  to  opposite 
sides  in  the  ledger  from  those  on  which  they  appear  in 
the  Cash  Book. 


Thirteenth  Lesson 


The  Sales  and  the  Purchase  Books 

207.  The  Sales  Book  contains  a  record  of  all  sales  of  merchandise  which 
are  billed  to  the  customer,  whether  paid  for  at  the  time,  or  sold  on  credit.  It  is 
a  book  of  original  entry  and  the  items  are  posted  from  it  direct  to  the  ledger. 

208.  The  idea  illustrated  by  the  Sales  Book,  as  explained  in  this  lesson, 
finds  expression  in  many  different  ways.  If  you  thoroughly  understand  the  work 
of  this  lesson,  you  will  have  no  difficulty  in  applying  any  one  of  the  different 
applications  of  the  Sales  Book  idea. 

209.  Study  carefully  the  following  transactions  and  the  manner  of  entering 
them  in  the  Sales  Book. 

Transactions  Illustrating  the  Use  of  the  Sales  Book 

July    5     Sold  to  O.  H.  Harlan,  Pontiac,  111.,  on  account  30  days,  10  bbls.  XX  Salt  at  95c. 

July  6  Sold  to  Arthur  Bennett,  619  Main  street,  Beloit,  Wis.,  on  account  60  days,  2  per 
cent  10  days,  3  bags  Rio  Coffee,  135  lbs.  each,  at  15c. 

July    8     Sold  to  the  Ames  Mercantile  Co.,  Ames,  Iowa,  terms  90  days  net,  1   per  cent  30 
days,  3  per  cent  10  days:     20  bbls.  Patent  Flour  at  $4.10;  3  bbls.  Pearl  Hominy. 
660  lbs.,  at  2c;  2  sacks  White  German  Sago,  250  lbs.,  at  4l/2c;   10  cases  Malta 
Vita  at  $2.75. 
They  are  allowed  a  special  discount  of  5  per  cent  from  regular  list  price. 

July  10  Sold  to  Wellington  Bros.,  Aurora,  111.,  and  received  in  payment  their  60-day  note 
with  interest  at  6  per  cent:  3  bbls.  Corn  Syrup,  150  gals,  at  21c;  7  cases  Edu- 
cator Wafers,  1  lb.  tins,  at  $2.90;  10  cases  Quaker  Oats  at  $1.65 

70 


LOCKYEAR'S    BOOKKEEPING 


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Posting  From  the  Sales  Book 

210.  Each  person  is  debited  in  the  ledger  for  the  amount  sold  to  him.  At 
the  end  of  the  month,  or  whenever  desired,  the  total  of  the  merchandise  sales  is 
posted  to  the  credit  side  of  the  Merchandise  account  in  the  ledger.  The  amounts 
entered  in  the  right-hand  column  of  the  Sales  Book  are  footed  at  the  bottom  of 
each  page  and  carried  forward  to  the  top  of  the  following  page. 

211.  The  sales  column  is  footed  and  ruled  as  shown  in  Illustration  No.  35, 
at  the  time  when  the  total  sales  are  posted  to  the  Merchandise  account. 

212.  Posting  from  the  Sales  Book  is  indicated  by  writing  the  letter  "S" 
immediately  to  the  left  of  the  folio  column  in  the  ledger.     In  all  future  exercises 


72  LOCKYEAR'S  BOOKKEEPING 

in  which  more  than  one  book  of  original  entry  is  used,  you  will  indicate  the  book 
from  which  the  posting  is  done  by  writing  the  initial  of  the  name  of  the  book  as 
explained  in  this  paragraph. 

It  is  apparent  that  the  Sales  Book  saves  much  labor,  not  only  in  making  the 
original  entries,  but  especially  in  the  work  of  posting  to  the  Merchandise  account. 

213.  In  the  sale  to  Wellington  Bros.,  you  will  observe  that  they  are  debited, 
although  they  paid  by  giving  their  note.  In  a  complete  set  of  books,  they  would 
be  given  credit  through  the  Journal.  The  journal  entry  would  be  a  debit  to  Bills 
Receivable,  and  a  credit  to  Wellington  Bros. 

The  entry  of  July  10,  could  have  been  made  in  the  Sales  Book  by  debiting 
Bills  Receivable  account  in  place  of  Wellington  Bros.,  but  that  entry  would  not 
show  on  the  ledger  that  Wellington  Bros,  had  purchased  anything.  The  method 
illustrated  here  is  preferable  as  it  gives  the  proprietor  a  complete  record  of  all 
transactions  with  each  customer. 

The  Purchase  Book 

214.  The  Purchase  Book  is  a  book  of  original  entry,  containing  a  record 
of  all  merchandise  bought  on  account. 

215.  Each  entry  in  the  Purchase  Book  should  show  the  name  and  the  ad- 
dress of  the  person  from  whom  the  goods  were  bought,  the  date,  terms,  and  the 
amount  of  the  purchase.  The  items  bought  are  not  recorded  as  they  are  shown 
on  the  invoice,  which  is  filed  for  reference. 

Just  as  in  the  case  of  the  Sales  Book,  there  are  many  different  ways  in  which 
the  Purchase  Book  idea  may  be  applied. 

216.  Each  person  from  whom  goods  are  bought  is  credited  in  his  account 
in  the  ledger  for  the  amount  of  the  invoice,  and  at  the  end  of  the  month,  or  when- 
ever desired,  the  Merchandise  account  is  debited  for  the  total  purchases. 

217.  Study  carefully  the  following  transactions  and  the  method  of  making 
the  entries  in  the  Purchase  Book. 

Transactions  Illustrating  the  Use  of  the  Purchase  Book 

April  10     Bought    from    Hibbard,    Spencer,    Bartlett   &   Co.,    Chicago,   invoice   of    hardware 

dated  April  4,  amounting  to  $376.90.     Terms:  60  days,  net;  2  per  cent,  30  days; 

3  per  cent,  10  days. 
April  11     Received  invoice  of  cutlery   from   the   McVoy-Wessling   Hardware   Co.,   Chicago, 

dated  April  3,  $225.     Terms :  30  days,  net ;  2  per  cent.  10  days. 
April  15     Bought  from  the  Simmons  Hardware  Co.,  St.  Louis,  Mo.,  invoice,  dated  April  9, 

$267.80.     Terms :  $100  cash,  balance  by  30-day  note  at  6  per  cent. 
April  20     Bought  invoice  dated  April  IS,  amounting  to  $348.50,  from  George  W.  Trout  Co., 

St.  Paul,  Minn.      Terms:  60  days,  net;  2  per  cent,  10  days. 


LOCKYEAR'S    BOOKKEEPING 


73 


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Illustration  No.  36 


Exercise  No.  18 

218.  This  exercise  is  a  brief  test  of  your  knowledge  of  the  proper  use  of 
the  Journal,  Cash  Book,  Sales  Book,  and  Purchase  Book.  The  work  will  be 
posted  to  the  ledger,  after  which  a  trial  balance  will  be  taken,  the  statement  made 
out,  and  the  ledger  closed,  giving  you  a  further  opportunity  to  demonstrate  your 
knowledge  of  the  previous  lessons. 

219.  The  articles  bought  and  sold  illustrate  the  Carpet  and  Furniture  busi- 
ness. Exercise  care  in  making  the  computations.  Check  your  figures  before 
entering  them  in  the  books. 

Take  four  sheets  of  journal  paper  and  indicate  the  purpose  for  which  they  are 
to  be  used,  by  writing  at  the  top  of  each  sheet.  Journal,  Cash  Book,  Sales  Book, 
and  Purchase  Book,  respectively.  If  in  doubt  as  to  how  to  proceed,  consult  your 
teacher. 


Carpet  and  Furniture  Transactions 

May     2     Henry  Brown  and  Alfred  Munson  engaged  in  the  Carpet  and  Furniture  business, 

each  investing  $2,000  cash. 
May     3     Bought    from    the    Carpen    Furniture    Co.,    Chicago,    invoice    dated    May    2,    $510. 

Terms :    30  days ;  2  per  cent,  10  days. 
May     3     Paid  store  rent  for  one  month,  $75. 
May     4     Bought  from  the  Richardson  Carpet  Co.,   Chicago,  invoice  dated  May  3,  $393,  on 

account,  30  days. 
May    4     Sold  to  William  Watson,  1047  N.  Dearborn  Ave.,  on  account,  1  Oak  Dresser,  $47. 


74  LOCKYEAR'S  BOOKKEEPING 

May     4     Sold  to  Neil  Jenkins,  Harvey,  111.,  on  account:     12  Oak  Chairs  at  $1.50;   1  Oak 

Dresser,  $47;  2  Chiffoniers  at  $25. 
May     5     Paid  cash,  $125,  for  desks  and  fixtures  for  office  use. 

219a.  Debit  this  amount  to  an  account  called,  "Furniture  and  Fixtures." 
This  account  shows  the  cost  of  all  furniture  and  appliances  bought  for  use  in  the 
office  or  the  store.  At  the  time  of  closing  the  books,  the  property  charged  to 
this  account  should  be  inventoried  at  less  than  the  original  cost  to  allow  for 
depreciation  on  account  of  wear. 

May  5  Sold  to  James  Harvey,  Evanston,  111.,  on  account :  30  yds.  Brussels  Stair  Carpet 
at  65c;  SO  yds.  Domestic  Ingrain  Carpet  at  $1.20;  40  yds.  Oil  Cloth  at  85c. 

May  5  Sold  to  Mrs.  Charles  Farnsworth,  Oak  Park,  111.,  and  received  cash  $100,  balance 
on  account,  30  days:  20  yds.  Cork  Linoleum  at  $1.10;  40  yds.  Wilton  Carpet  at 
$2.40 ;  2  Oak  Dressers  at  $47. 

Note:     In  the  Sales  Book,  debit  Mrs.  Charles  Farnsworth  for  the  whole  amount.     In 
the  Cash  Book,  credit  her  on  the  debit  side  for  the  $100  paid  in  cash. 

May  7  Sold  Adam  Volker,  1962  Lake  Ave.,  on  account:  3  Dining  Tables  at  $40;  2  Oak 
Dressers  at  $47;  24  Oak  Chairs  at  $1.50;  45  yds.  Brussels  Stair  Carpet  at  65c. 
Received  in  payment  note  at  15  days  with  interest  at  6  per  cent. 

May    9     Paid  cash  for  stamps  and  stationery,  $12. 

May  9  Bought  from  Alexander  H.  Revell  &  Co.,  Chicago,  111.,  invoice  dated  May  8,  $285, 
and  gave  in  payment  30-day  note  with  interest  at  6  per  cent. 

May    9    Henry  Brown  took  $30  cash  from  drawer  for  his  personal  use. 

May  10    William  Watson  paid  cash  for  bill  of  the  4th,  $47. 

May  10  Sold  William  Watson,  on  account:  100  yds.  Oil  Cloth  at  50c;  25  yds.  Wilton 
Carpet  at  $2.40;  3  Oak  Dressers  at  $47;  2  China  Closets  at  $30;  2  Tables  at 
$40.  As  Mr.  Watson  will  be  a  liberal  buyer  he  is  allowed  a  special  trade  dis- 
count of  10  per  cent  on  the  regular  price. 

219&.  For  method  of  entering  this  transaction  in  the  Sales  Book,  see  sale  to 
Ames  Mercantile  Co.,  in  Illustration  No.  35. 

Trade  discount  is  a  deduction  made  from  the  list  price.  As  it  is  deducted 
at  the  time  of  the  sale,  it  does  not  appear  in  any  account  in  the  ledger. 

May  13     Miscellaneous  cash  sales  to  date,  $310.50. 

May  13     Paid  Carpen  Furniture  Co.  cash  for  invoice  of  the  3d  inst.,  less  2  per  cent  discount. 

219c.  Enter  the  above  as  follows:  On  the  credit  side  of  the  Cash  Book 
debit  Carpen  Furniture  Co.  for  the  whole  amount,  $510.  On  the  debit  side  of 
the  Cash  Book,  credit  discount  for  $10.20,  which  is  the  2%  allowed  for  payment 
in  10  days.  The  difference  between  these  two  entries  is  the  exact  amount  of 
cash  paid  to  Carpen  Furniture  Co.  If  the  entry  is  not  clear  to  you,  ask  your 
teacher  for  further  explanation. 

May  16     Paid  freight  on  goods  bought  from  Alexander  H.  Revell  &  Co.,  on  the  9th  inst., 

$23.75. 
May  20     Buy  from  Carpen  Furniture  Co.,  on  account,  invoice  dated  May  18,  $343.50. 


LOCKYEAR'S  BOOKKEEPING  75 

May  20  Sold  to  Adam  Volker  and  received  $230  cash  to  apply  on  the  sale,  balance  on  ac- 
count:  4  Chiffoniers  at  $25;  3  China  Closets  at  $30;  75  yds.  Cork  Linoleum  at 
$1.10;  75  yds.  Domestic  Ingrain  Carpet  at  $1.20. 

May  23    Adam  Volker  paid  his  note  due  to-day  with  interest.    The  interest  for  15  days  is  70c. 

May  25    Alfred  Munson  takes  from  stock  for  personal  use,  1  Oak  Dresser  at  %27. 
Note:     He  is  charged  at  cost  price.     Make  the  entry  in  the  Sales  Book. 

May  31     James  Harvey  pays  cash  to  apply  on  account,  $75. 

May  31     Paid  salaries  to  date,  $230. 

Before  going  on  with  the  work  have  all  the  entries  verified  by  the  teacher. 

220.  Directions  for  proceeding: 

(a)  Post  from  the  books  in  the  following  order : 

(1)  Purchase  Book. 

(2)  Sales  Book. 

(3)  Cash  Book. 

(4)  Journal. 

(b)  Check  the  posting  carefully.     Remember  to  use  a  check  mark 

(V)»  otherwise  the  checking  is  valueless. 

(c)  Take  a  Trial  Balance. 

(d)  Take  Inventories. 

(1)  Merchandise  on  hand  is  as  follows,  and  is  valued  at 

cost. 

20  yds.  Brussels  Stair  Carpet,  at  45c. 
75  yds.  Domestic  Ingrain  Carpet,  at  75c. 
35  yds.  Wilton  Carpet,  at  $1.05. 
10  yds.  Oil  Cloth,  at  50c. 

5  yds.  Cork  Linoleum,  at  75c. 
28  Chairs,  at  85c. 

3  Dressers,  at  $30. 

7  Chiffoniers,  at  $12.50. 

2  China  Closets,  at  $15. 

2  Tables,  at  $27. 

(2)  Furniture  and  Fixtures.     Deduct   10  per  cent  from 

original  cost. 

(e)  Make  out  a  statement  showing  the  condition  of  the  business. 

(See  Seventh  Lesson,  Section  101.) 
(/)     Close  the  ledger. 

(g)     Take  a  second  trial  balance.     (See  Section  173.) 
(h)     Hand  all  your  work  to  the  teacher  for  examination. 

221.  Prepare  written  answers  to  the  following  and  hand  to  your  teacher: 

(a)  What  is  a  Sales  Book? 

(b)  What  is  a  Purchase  Book? 


76  LOCKYEAR'S  BOOKKEEPING 

(c)  What  advantages  are  there  in  the  use  of  these  books? 

(d)  Why    do  you  not  enter  the  items  in  the  Purchase  Book? 
(c)     Explain  the  method  of  posting  from  the  Sales  Book? 

(/)     What  items  are  charged  to  the  Furniture  and  Fixtures  account? 

(g)  Explain  how  to  enter  the  following  transaction  in  the  Cash 
Book :  James  Brown  owes  us  $600.00.  He  is  allowed  a 
discount  of  $20.00,  and  pays  $580.00  cash  to  settle  in  full. 

(h)  What  is  the  reason  that  no  entry  is  made  for  a  discount  de- 
ducted from  the  list  price  of  goods  at  the  time  of  sale? 


Fourteenth  Lesson 


The  Cash  Journal 

222.  The  Cash  Journal  is  a  book  of  original  entry  and,  as  the  name  implies, 
is  a  combination  of  the  Journal  and  the  Cash  Book.  The  form  given  on  the  next 
pages  has  a  column  for  Miscellaneous  items  and  columns  for  Cash,  Merchandise. 
Accounts  Receivable  and  Accounts  Payable. 

223.  Read  all  the  transactions  and  observe  carefully  the  entry  for  each. 
Transactions  Illustrating  the  Use  of  the  Cash  Journal 

May     1     Evans  Bros,  commenced  the  Grain,  Feed  &  Fuel  business  May  1.  with  a  cash  capital 
of  S3.000.00. 

Observe  that  cash  is  debited  with  $3,000.00  and  Evans  Bros,  are  credited  in 
the  Miscellaneous  column.  Their  name  is  written  over  against  the  date  column 
followed  by  a  brief  explanation.  This  item  will  later  be  posted  to  the  credit  of 
their  account  in  the  ledger. 

May    2     Bought  from  R.  G.  Davis  for  cash,  600  bu  Wheat  at  80c. 

May    3     Paid  cash  for  rent,  $30.00. 

May    4     Bought  from  A.  W.  Allen,  on  account,  400  bu.  Oats  at  40c. 

Observe  that  Merchandise  is  debited  with  $160.00  and  A.  W.  Allen  is 
credited  in  the  Accounts  Payable  column  with  the  same  amount.  His  name  is 
written  over  against  the  date  column  followed  by  a  short  explanation  and  the 
$160.00  will  later  be  posted  to  the  credit  of  his  account. 

May    4     Bought  from  J.  G.  Evans,  on  account,  500  bu.  Corn  at  50c. 
May     5     Sold  Frank  Case,  on  account,  100  bu.  Corn  at  60c. 

Observe  that  Merchandise  is  credited  with  $60.00  and  Frank  Case  is  charged 
with  the  same  amount  in  the  Accounts  Receivable  column.     His  name  is  written 
over  against  the  date  column  followed  by  an  explanation  and  later  the  $60.00 
will  be  posted  to  the  debit  side  of  his  account. 
May    6    Sold  Geo.  Horn  for  his  30-day  note,  200  bu.  Wheat  at  90c. 


78 


LOCKYEAR'S  BOOKKEEPING 


Observe  that  Bills  Receivable  is  debited  with  $180.00  in  the  Miscellaneous 
column  and  Merchandise  is  credited  with  the  same  amount.  This  item  will  later 
be  posted  to  the  debit  side  of  Bills  Receivable  in  the  ledger. 

May    6  Bought  from  Frank  Case  for  cash,  40  tons  Coal  at  $2.00. 

May    8  Bought  from  Geo.  Cates,  50  cords  Wood  at  $2,  and  gave  in  payment  my  60-day 

note  with  interest  at  6%. 

May    9  Paid  cash  for  labor,  $4. 

May  10  Bought  from  A.  W.  Allen,  on  account,  30  bales  Hay  at  90c,  and  100  bu.  Corn  at  60c. 

May  11  Bought  from  J.  G.  Evans,  on  account,  200  bu.  Oats  at  40c. 

May  11  Sold  Geo.  Lee  for  cash  6  tons  Coal  at  $3. 

May  12  Sold  Harry  Norman  for  cash  10  tons  Coal  at  $3.50. 

May  13  Sold  A.  Birdsell  200  bu.  Oats  at  50c  for  his  30-day  note. 


MISCELLANEOUS 


NAME   OF  ACCOUNT 


EXPLANATION 


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LOCKYEAR'S    BOOKKEEPING 


79 


May  15  Sold  Frank  Case,  on  account,  100  bu.  Oats  at  40c. 

May  16  Bought  from  Charles  Gray,  300  bu.  Wheat  at  80c,  for  my  note  at  45  days. 

May  20  Bought  from  A.  W.  Allen,  on  account,  20  cords  Wood  at  $3. 

May  22  Paid  cash  for  repairs  on  wagon,  $4.50. 

May  24  Paid  A.  W.  Allen  $50  to  apply  on  account. 

May  27  Paid  J.  G.  Evans  $100  to  apply  on  account. 

May  29  Received  $30  from  Frank  Case  to  apply  on  account. 


Posting  From  the  Cash  Journal 

224.     It  is  not  necessary  to  open  an  account  with  Cash  in  the  ledger  as  this 
account  is  kept  in  the  Cash  Journal.     The  method  of  showing  the  cash  balance 


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80 


LOCKVEAR'S  BOOKKEEPING 


at  the  end  of  the  month  is  illustrated  in  the  model  Cash  Journal.     (See  Illustra- 
tion No.  37.) 

225.     Open  an  account  with  Merchandise  in  the  ledger  and  post  the  totals 
of  the  Merchandise  column. 


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Illustration  No.  38 


LOCKYEAR'S  BOOKKEEPING  81 

226.  In  posting  the  totals  of  special  columns,  check  them  by  encircling  the 
ledger  page  as  shown  in  the  Merchandise  column  in  the  model  Cash  Journal. 

227.  All  the  items  in  the  Miscellaneous,  Accounts  Receivable,  and  Accounts 
Payable  columns  are  posted  daily  to  their  proper  accounts.  In  posting  from 
these  three  columns,  the  debit  items  in  the  Miscellaneous  column  are  posted 
first  and  then  the  credit  item  of  the  same  column.  Observe  the  same  order  in 
Posting  from  the  Accounts  Receivable  and  Accounts  Payable  columns.  As  you 
post,  check  each  item  by  placing  the  ledger  page  in  the  folio  column  in  the  Cash 
Journal. 

Special  Column  Books 

228.  Special  column  books  are  those  provided  with  special  money  columns 
for  the  transactions  which  occur  most   frequently   in  the  business. 

229.  Some  of  the  advantages  of  special  columns  in  books  of  original 
entry  are : 

(a)  They  save  labor. 

(b)  They   furnish   a   convenient  method   of   subdividing  accounts 

in   order   to   give   more   detailed   information   about   them. 

(c)  They  simplify  the  work  of  taking  trial  balances  by  reducing 

the  number  of  accounts  through  the  employment  of  Con- 
trolling accounts  and  Subordinate  ledgers. 

Subdividing  Accounts 

230.  Take  as  an  example  the  Grocery  business  in  with  the  goods  handled 
include  a  general  line  of  staple  groceries,  cigars  and  tobaccos,  wines  and  liquors. 
Instead  of  crediting  all  sales  of  these  various  items  to  a  general  merchandise 
account,  open  three  separate  accounts,  namely.  Groceries,  Cigars  and  Tobaccos, 
Wines  and  Liquors.  This  classification  can  be  easily  made  by  providing  special 
columns  in  the  Sales  and  Purchase  Books.  At  the  end  of  the  month  the  totals 
of  each   of  the   special  columns   would  be  posted  to   their   respective   accounts. 

231.  By  this  method  the  dealer  can  determine  the  loss  or  gain  of  the 
various  departments  of  his  business.  This  enables  him  to  strengthen  a  losing 
department  or  discontinue  it  altogether,  and  to  push  that  part  of  his  business 
which  shows  the  greatest  returns. 

Controlling  Accounts 

232.  In  many  large  concerns  it  is  desirable  to  provide  individual  ledgers 
for  certain  classes  of  accounts ;  for  instance,  all  accounts  of  customers  may  be 
kept   in   a   separate   ledger      This   ledger   is   known   by   many   different   names, 


82  LOCKYEAR'S  BOOKKEEPING 

such  as,  Accounts  Receivable  ledger,  Sales  ledger,  etc.  However,  the  name  is 
immaterial.  It  is  the  purpose  for  which  it  is  used  that  is  important.  Another 
ledger  may  be  kept  for  accounts  with  persons  from  whom  we  buy.  This  may 
be  called  the  Purchase  ledger,  Accounts  Payable  ledger,  etc. 

233.  To  secure  the  greatest  advantage  from  the  use  of  Subordinate  ledgers, 
Controlling  accounts  must  be  opened  in  the  General  ledger. 

234.  A  Controlling  account  is  an  account  opened  in  the  General  ledger  to 
represent  the  totals  of  any  class  of  accounts  for  which  a  special  ledger  is  pro- 
vided. 

235.  The  principle  involved  in  using  Controlling  accounts  for  special  ledgers 
can  be  briefly  explained  by  referring  to  the  transactions  illustrating  the  Cash 
Journal  in  this  lesson. 

236.  Assume  that  a  special  ledger  is  used  for  all  Accounts  Receivable  and 
another  for  the  Accounts  Payable.  In  posting  the  individual  items  in  the  special 
column  of  the  Cash  Journal  headed  "Accounts  Receivable"  each  person  would 
be  debited  or  credited  in  his  account  in  the  Accounts  Receivable  ledger.  The 
items  in  the  Accounts  Pay  able  column  would  be  posted  to  the  individual  accounts 
in  the  Accounts  Payable  ledger. 

237.  At  the  end  of  the  month  an  account  would  be  opened  in  the  General 
ledger  under  the  title  "Accounts  Receivable  Ledger,"  and  this  account  would  be 
debited  and  credited  for  the  footings  of  the  Accounts  Receivable  column.  An- 
other account  called  "Accounts  Payable  Ledger"  would  be  opened  for  the  foot- 
ings of  the  Accounts  Payable  column. 

238.  In  any  business  the  personal  accounts  are  the  most  numerous.  You 
will  observe  that  the  General  ledger  would  contain  very  few  accounts  when  Subor- 
dinate ledgers  and  Controlling  accounts  are  used.  The  work  of  taking  a  trial 
balance  is  thus  reduced  to  the  minimum. 

239.  The  Controlling  account  in  the  General  ledger  must  agree  with  the 
ledger  it  represents.  To  prove  this,  take  an  abstract  of  the  ledger.  This  is  done 
by  finding  the  total  of  all  the  balances  of  the  open  accounts  in  the  special  ledger. 
For  instance,  the  total  of  the  balances  in  the  Accounts  Receivable  ledger  should 
equal  the  difference  between  the  two  sides  of  the  "Account  Receivable  Ledger" 
account  in  the  General  ledger. 

240.  The  Cash  Journal  illustrated  in  Section  223  shows  an  original  form 
of  a  special  column  book  adapted  to  many  lines  of  business.  It  has  no  doubt 
occurred  to  you  that  special  columns  could  have  been  added  for  Expense,  Bills 
Payable,  and  Bills  Receivable.  This  idea  can  be  carried  out  to  suit  the  special 
requirements  of  any  business.  Keep  in  mind  that  special  columns  should  be  pro- 
vided only  for  those  transactions  which  are  of  frequent  occurrence  in  the  business. 


LOCKYEAR'S    BOOKKEEPING 
Exercise  No.  19 


83 


241.  This  exercise  is  designed  to  give  you  practice  in  the  use  of  the  Cash 
Journal,  Controlling  accounts  and  special  ledgers  for  Accounts  Receivable,  and 
Accounts  Payable. 

Enter  the  following  transactions  on  specially  ruled  paper  which  you  will  find 
among  your  supplies. 


Tea  and  Coffee  Transactions 

June     1     C.  B.  Wood  engaged  in  the  wholesale  tea,  coffee  and  spice  business  with  a  cash 

investment  of  $3,500. 
June    2     Bought  from  C.  Jevne  &  Co.,  on  account,  5  bags  Golden  Rio  Coffee,  135  lbs.  each. 

at  lie;  4  chests  Young  Hyson  Tea,  75  lbs.  each,  at  40c;  4  chests  Gunpowder 

Tea,  70  lbs.  each,  at  37c. 
June    2     Bought  from  Franklin  MacVeagh  &  Co.,  on  account,  20  doz.   1-lb.  tins,  Allspice 

at  $2;  10  doz.  J4-Ib.  tins,  Cinnamon  at  $3. 
June    2     Paid  cash  for  freight  on  above  invoices,  $4. 
June     3     Sold  for  cash,  1  bag  Golden  Rio  Coffee,  135  lbs.,  at  22c. 
June    4     Bought  from  Sprague,  Warner  &  Co.,  on  account,  10  bales  Mocha  Coffee,  80  lbs. 

each,  at  20c ;  10  chests  Green  Japan  Tea,  80  lbs.  each,  at  35c. 
June     5     Sold  to  C.  W.  Brady,  on  account,  4  bales  Mocha  Coffee,  80  lbs.  each,  at  30c;  5  doz. 

y2-\b.  tins,  Cinnamon  at  $4.50. 
June    6     Bought  from  McNeil  &  Higgins  Co.,  on  account,  10  bags  Bogota  Coffee,  135  lbs. 

each,  at  16c. 
June    8     Sold  the  Acme  Grocery  Co.,  for  cash,  3  bags  Bogota  Coffee,  135  lbs.  each,  at  22c. 
June    8     Paid  cash  for  labor,  $3. 
June    9     Sold  to  the  Acme  Grocery  Co.,  on  account,  1  chest  Gunpowder  Tea,  70  lbs.,  at  52c; 

1  chest  Green  Japan,  80  lbs.,  at  48c. 
June  10     Gave  Sprague,  Warner  &  Co.,  note  at  10  days  with  interest  at  6%,  for  invoice  of 

June  4. 
June  10    Received  $50  cash  from  C.  W.  Brady,  to  apply  on  account. 
June  10     Bought  from  Sprague,  Warner  &  Co.,  on  account,  150  lbs.  Cloves,  at  23c;  4  chests 

Young  Hyson  Tea,  75  lbs.  each,  at  35c. 

241a.  When  you  have  filled  the  first  page  of  your  Cash  Journal,  foot  each 
column  in  small  lead-pencil  figures.  Before  transferring  the  footings  to  the  first 
line  of  the  next  page,  prove  your  work  by  ascertaining  that  the  total  of  all  the 
debit  footings  equals  the  total  of  all  the  credit  footings.  Do  not  enter  the  foot- 
ings in  ink  until  you  have  completed  entering  all  the  transactions,  and  they  have 
been  verified  by  the  teacher.  Always  leave  a  blank  line  at  the  top  of  each  page 
for  the  footings  of  the  previous  page. 

June  11     Sold  to  R.  H.  Richie,  on  account,  1  chest  Young  Hyson,  75  lbs.,  at  60c. 
June  12     Bought  from  Franklin  MacVeagh  &  Co.,  on  account,  20  doz.  V^-lb.  tins,  Cinnamon 
at  $3;  5  bales  Mocha  Coffee,  80  lbs.  each,  at  20c. 


84 


LOCKYEAR'S  BOOKKEEPING 


June  12  Sold  to  Samuel  Brown,  4  chests  Young  Hyson,  75  lbs.  each,  at  60c. 

June  15  Paid  C.  Jevne  &  Co.,  for  invoice  of  June  2,  by  paying  them  cash  $100,  and  balance 

by  30-day  note,  with  interest  at  6%. 

June  15  Sold  R.  11.  Richie,  on  account,  12  doz.  y2-\b.  tins,  Cinnamon  at  $4.50. 

June  15  C.  W.  Brady  paid  $25  cash  on  account. 

June  15  Paid  cash  to  Franklin  MacYeagh  &  Co.,  in  full  for  invoice  of  the  2d  inst. 

June  15  Sold  Harry  Summers,  on  account,  5  bags  Mocha  Coffee,  80  lbs.  each,  at  30c. 

June  16  Bought    from    Sprague,    Warner   &   Co.,   on    account,    10   chests   Gunpowder    Tea, 

70  lbs.  each,  at  37c. 

June  16  Received  note,  on   account,   from   Samuel   Brown,  $180. 

June  17  Received  cash  from  R.  H.  Richie,  on  account,  $45. 

June  17  Sold  for  cash,  75  lbs.   Cloves  at  34c. 

June  17  Paid  Sprague,  Warner  &  Co.  cash  for  invoice  of  the  10th  inst.,  less  3%  discount. 

241b.  Enter  this  writing  "Sprague,  Warner  &  Co."  on  one  line,  followed 
by  a  brief  explanation  and  extending  the  full  amount  of  the  invoice  $139.50  in 
the  debit  column  of  the  Accounts  Payable  section  of  the  Cash  Journal.  On  the 
next  line,  write  "Interest  and  Discount,"  followed  by  the  explanation,  "3%  on 
above  Inv.,"  and  extending  the  amount  $4.19  in  the  credit  column  of  the  Miscel- 
laneous section,  and  in  the  credit  column  of  the  Cash  section  write  the  amount 
of  cash  paid  out,  $135.31. 

June  18     Bought  from  C.  Jevne  &  Co.,  on  account,  5  bags  Bogota  Coffee,  135  lbs.  each,  at 

16c;  5  bags  Golden  Rio  Coffee,  135  lbs.  each,  at  lie. 
June  19     Sold  to  George  Howe,  and  received  $50  cash,  and  balance  to  be  paid  in  30  days, 

5  chests  Green  Japan  Tea,  80  lbs.  each,  at  48c;  10  doz.  1-lb.  tins,  Allspice,  at  $3; 

4  bags  Golden  Rio  Coffee,  135  lbs.  each,  at  16c. 
June  19     Paid  cash  for  advertising,  $96. 

June  19     Sold  to  Samuel  Brown,  on  account,  7  bags  Bogota  Coffee,   135  lbs.  each,  at  22c. 
June  19     Sold  C.  W.  Brady,  on  account,  5  chests  Gunpowder  Tea,  75  lbs.  each,  at  52c ;  30  lbs. 

Cloves  at  34c. 
June  19     Paid  McNeil  &  Higgins  Co.,  cash  to  apply  on  account,  $100. 
June  20     Paid  Sprague,  Warner  &  Co.,  cash  to  apply  on  account,  $50. 
June  20     Paid  cash  for  note  of  the  10th  inst.,  favor  Sprague,  Warner  &  Co.,  with  10  days' 

interest. 

Note:     Calculate    the    interest    at    6    per    cent.     Have    your    answer    verified    by    your 
teacher  before  entering  in  the  books. 

June  20     Sold  R.  H.  Ritchie,  on  account,  4  bags  Golden  Rio  Coffee,  135  lbs.  each,  at  16c; 

5  doz.   1-lb.  tins,  Allspice,  at  $3. 

June  22     Sold  to  Amos  Dean,  on  account,  5  bags  Bogota  Coffee,  135  lbs.  each,  at  22c. 

June  22     Paid  cash  for  labor,  $7. 

June  22     Received  cash  from  Acme  Grocery  Co.,  $74.80. 

June  22     Sold  C.  W.  Brady,  on  account,  2  chests  Green  Japan  Tea,  80  lbs.  each,  at  48c. 

June  24     Received  cash  from  Samuel  Brown  for  note  of  the  16th  inst.,  $180. 

June  24     Received   cash   from   C.   W.   Brady   for  balance  of  bill   sold   him  on  the  5th  inst.. 

$43.50;   also  received  his  note  at  30  days  with  interest  at  6%    for  bill  of  the 

19th  inst. 


LOCKYEAR'S  BOOKKEEPING  85 

June  25     Bought  from  C.  Jevne  &  Co.,  on  account,  10  doz.  1-lb.  tins,  Allspice  at  $2;  50  lbs. 

Cloves  at  23c ;  6  chests  Green  Japan  Tea,  80  lbs.  each,  at  35c. 
June  25     Sold  Harry  Summers,  on  account,  4  chests  Green  Japan  Tea,  80  lbs.  each,  at  48c. 
June  26     Gave  McNeil  &  Higgins  Co.  note  at  30  days  for  balance  of  invoice  of  the  6th  inst. 

Before  handing  your  Cash  Journal  to  the  teacher  to  be  verified,  test  the 
footings  as  instructed  in  Section  241a. 


Directions  for  Proceeding  With  the  Work 

242.  Posting:  This  exercise  calls  for  three  ledgers:  a  General  ledger,  an 
Accounts  Receivable  ledger,  and  an  Accounts  Payable  ledger.  You  will,  there- 
fore, take  three  sheets  of  ledger  paper,  and  mark  them  accordingly. 

First,  post  the  items  in  the  Accounts  Payable  column  to  their  respective 
accounts  in  the  Accounts  Payable  ledger,  giving  each  account  five  lines. 

Post  the  items  in  the  Accounts  Receivable  column  to  the  Accounts  Receiv- 
able ledger,  giving  the  accounts  with  C.  W.  Brady  and  R.  H.  Richie  six  lines 
each  and  the  others  four  lines  each. 

Post  the  items  in  the  Miscellaneous  column  to  the  General  ledger,  allowing 
five  lines  to  each  account. 

243.  Next  open  the  following  accounts  in  your  General  ledger :  Merchan- 
dise, Accounts  Receivable  Ledger,  Accounts  Payable  Ledger.  Post  to  these 
accounts  the  footings  of  their  respective  columns  in  the  Cash  Journal. 

244.  Take  a  Trial  Balance  of  the  General  ledger.  Do  not  forget  to  in- 
clude the  footings  of  the  cash  column  in  the  Cash  Journal. 

245.  Should  you  have  difficulty  in  getting  a  Trial  Balance,  the  error  is  very 
likely  to  be  one  in  posting  the  Miscellaneous  column.  Before  checking  the 
correctness  of  your  posting,  be  sure  that  there  are  no  errors  in  your  additions 

246.  Merchandise  inventory  is  taken  at  cost,  and  comprises  the  following 
items : 

15  doz.  1-lb.  tins.  Allspice  at  $2.00. 

13  doz.  y2-\b.  tins,  Cinnamon  at  $3.00. 

95  lbs.  Cloves  at  23c. 

4  chests  Green  Japan  Tea,  80  lbs.  each,  at  35c. 

3  chests  Young  Hyson  Tea,  75  lbs.  each,  at  40c. 

8  chests  Gunpowder  Tea,  70  lbs.  each,  at  37c. 

1  bag  Golden  Rio  Coffee,  135  lbs.  at  lie. 

6  bales  Mocha  Coffee,  80  lbs.  each,  at  16c. 

Hand  the  inventory  to  the  teacher  for  verification  before  proceeding. 


86  LOCKYEAR'S  BOOKKEEPING 

247.  Prepare  Abstracts  of  the  Accounts  Receivable  and  the  Accounts  Pay- 
able ledgers  and  verify  by  comparing  with  the  balances  shown  by  their  Controlling 
accounts  in  the  General  ledger.  Use  journal  paper  for  this  purpose,  and  for 
additional  explanation  refer  to  Section  239. 

248.  Make  out  a  statement  showing  the  condition  of  the  business. 

249.  Close  the  ledger. 

When  you  have  completed  all  the  work  called  for,  hand  to  your  teacher  for 
inspection. 

250.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher : 

(a)  What  is  a  Controlling  account? 

(b)  WThat  are  the  advantages  of  special  column  books? 

(c)  Suggest  how  special  columns  could  be  used  in  the  Sales  Book. 

In  the  Purchase  Book. 

(d)  Suggest  what  special  columns  could  be  used  to  advantage  in 

the  Cash  Book. 

(e)  In  case  of  difficulty  in  getting  your  trial  balance,  which  column 

in  the  Cash  Journal  would  you  check  first  in  order  to  locate 

the  error,  if  it  is  one  due  to  a  mistake  in  posting?     Why? 
(/)     Is  there  a  limit  to  the  special  columns  which  can  be  provided 

in  books  of  original  entry  ?    Explain. 
(g)     Suggest  a  modification  of  the  Cash  Journal  illustrated  in  this 

lesson. 


Fifteenth  Lesson 


Shipment  and  Consignment  Accounts 

251.  A  commission  business  is  one  in  which  the  proprietor  is  engaged  in 
shipping  and  receiving  goods  to  be  sold  on  commission. 

252.  By  shipment  is  meant  goods  sent  to  others;  the  goods  received  from 
others  are  known  as  a  consignment.  The  person  making  the  shipment  is  called 
the  consignor;  the  person  to  whom  the  goods  are  shipped  is  called  the  consignee. 

253.  The  legal  title  to  the  goods  rests  in  the  consignor  until  they  are  sold 
by  the  consignee.  The  consignee,  however,  has  a  lien  upon  the  goods  in  his 
possession  for  all  charges  incurred  on  their  account.  As  soon  as  the  goods  have 
been  sold,  the  consignee  becomes  indebted  to  the  consignor  for  the  net  proceeds. 
The  latter  should  be  remitted  or  placed  to  the  credit  of  the  consignor. 

254.  When  goods  are  shipped  to  others  to  be  sold  on  our  account  and  risk, 
an  account  is  opened  under  the  name  of  the  person  to  whom  the  shipment  is  made. 
For  instance,  if  a  shipment  is  made  to  C.  Runnels,  the  title  of  the  account  would 
be  "C.  Runnels,  Shipt.  No.  1."  Shipment:  should  be  numbered  consecutively.  If 
several  shipments  are  made  to  the  same  person,  a  separate  account  is  usually 
opened  with  each  lot. 

255.  When  goods  are  received  from  others  to  be  sold  on  their  account  and 
risk,  an  account  is  opened  under  the  name  of  the  person  from  whom  they  were 
received.  For  instance,  if  a  consignment  is  received  from  R.  L.  Brown,  the  title 
of  the  account  would  be  "R.  L.  Brown,  Cons.  No.  1." 

256.  A  shipment  account  represents  the  goods,  and  will  show  a  loss  or  a 
gain  after  the  account  has  been  credited  with  the  net  proceeds. 

257.  A  consignment  account  is  like  a  personal  account,  and  until  it  is  closed 
will  show  a  resource  or  a  liability. 

A  consignment  account  usually  shows  a  liability,  although  it  may  sometimes 
show  a  resource,  as  where  the  sales  of  property  belonging  to  it  are  less  than  the 
charges. 

87 


88  LOCKYEAR'S  BOOKKEEPING 

258.  An  account  sales  is  a  statement  rendered  by  the  consignee  to  the  con- 
signor, showing  in  detail  the  goods  sold,  all  the  charges,  and  the  net  proceeds. 

259.  At  the  time  of  making  a  statement  of  the  business,  consider  all  open 
shipment  accounts  (those  fur  which  account  sales  have  not  been  received)  as 
resources  for  the  difference  between  the  two  sides  of  the  account.  If  an  account 
sales  has  been  received  for  a  part  of  the  shipment,  then  the  value  of  the  unsold 
goods  will  be  the  resource  inventory  shown  by  the  account. 

The  goods  on  hand  belonging  to  a  consignment  are  the  property  of  the  con- 
signor, and  are  not  considered  in  closing  the  books. 

260.  The  entries  required  by  the  following  transactions  will  be  illustrated 
in  Journal  form  to  show  the  accounts  that  are  debited  and  credited.  Only  the 
items  affecting  the  Shipment  and  Consignment  accounts  are  posted  in  the  ledger 
illustrations.  A  careful  study  of  these  transactions  will  enable  you  to  under- 
stand the  principles  involved  in  the  handling  of  Shipment  and  Consignment 
accounts.  The  method  shown  here  is  applicable  where  this  class  of  accounts  do 
not  occur  frequently.  In  a  commission  business,  specially  ruled  books  are  gener- 
ally used  in  order  to  facilitate  the  work. 


Transactions  Illustrating  Shipping  and  Consignment  Accounts 

Shipped  to  A.  D.  Sprague,  Woodstock,  Illinois,  to  be  sold  at  our  risk,  merchan- 
dise valued  at  $275.00.     Paid  cash  for  hauling,  $4.00;  crating,  $6.50. 

Received  a  consignment  of  goods  from  O.  B.  Bauer,  Hammond,  Indiana,  to  be 
sold  for  his  account  and  risk.  Paid  the  following  charges  in  cash  :  freight 
$3.70 ;  drayage,  $2.50. 

Received  bank  draft  from  A.  D.  Sprague  for  $100.00  as  an  advance  payment  on 
account  of  shipment  sent  to  him  August  1. 

Received  $275.00  cash  for  sale  of  balance  of  goods  belonging  to  Bauer's  con- 
signment. 

Received  account  sales  from  A.  D.  Sprague  showing  net  proceeds  to  be  $247.80. 
Instead  of  remitting  in  cash,  he  has  placed  this  amount  to  our  credit  for 
10  days. 

Observe  that  in  the  above  transaction  A.  D.  Sprague  is  debited  in  his  personal 
account  for  the  amount  of  the  net  proceeds.  The  account  with  A.  D.  Sprague, 
Shipt.  No.  1,  is  the  account  with  the  property  and  not  with  him  personally. 

August  21  Rendered  an  account  sales  to  O.  B.  Bauer  to  close  consignment  received  from 
him  August  2.  In  addition  to  the  charges  appearing  against  this  account, 
deduct  the  following:  commission  at  3%;  insurance,  $2.00;  storage,  $2.50. 
The  net  proceeds,  ^>377.30  have  been  remitted  by  check. 


August 

1 

August 

2 

August 

14 

August 

16 

August 

19 

LOCKYEAR'S    BOOKKEEPING 


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Illustration  No.  40 


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LOCK  YEAR'S    BOOKKEEPING 


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261. 


Illustration  No.  41 

Exercise  No.  20 

Journalize  the  shipment  and  consignment  transactions  given  below. 

Commission  Transactions 


September     5     Commenced  the  Commission  business  and  invested  cash,  $500.00. 

September     5     Received  consignment  of  goods  from  Jos.  Lewin,  Springdale,  Mo.,  and  paid 

cash  for  freight,  $7.00. 
September    6     Shipped   a  car  of   produce,  valued   at  $340.00,   to   Walter   Fair,    Peoria.    111. 

Paid  cash  for  boxing,  $24.00,  and  hauling  to  freight  house,  $16.00. 
September     7     Received   a   consignment   of   watermelons    from   Arthur    Mann,    Macon,    Ga., 

to   be   sold   on   his    account   and    risk.      Paid    cash    for    freight    charges, 

$18.00. 
September     7     Sold  on  account  to  Olmsted  &  Wahl,  342  Center  St.,  goods  valued  at  $75.00, 

belonging  to  Lewin's  Cons.  No.  1. 
September     8     Received   a   consignment   of   potatoes    from   Jos.    Lewin,    and   paid   cash    for 

freight  and  hauling,  $19.00. 
September    8     Sold  from  Arthur  Mann's  consignment  goods  valued  at  $150.00.  and  received 

cash. 
September  11     Drew  a  sight  draft  on  Walter  Fair  for  $150.00  on  account  of  shipment  made 

him  on  the  6th,  and  left  it  at  the  bank  for  collection. 
Note:     No  entry  is  made  for  this  until  the  bank  notifies  you  that  the  sight  draft   has 
been   paid. 

September  11     Sold  for  cash,  $200.00,  balance  of  goods  from  Lewin's  Cons.  No.  1. 
September  12     Shipped    Marvin   &    Hart,    Kenosha,    Wis.,    to   be    sold   on    our    account    and 

risk,   goods   valued   at  $237.00.     Paid   cash   for   crating,   $8.00;    drayage, 

$10.00. 
September  13     Sold   to    O.    R.    Brown,   on    account,    goods   valued    at   $150.00   belonging   to 

Lewin's  Cons.  No.  3. 
September  16     Bank  notifies  you  that  draft  on  Walter  Fair  has  been  collected.     The  charge 

for  collection  is  30  cents.    Make  the  proper  entry  in  the  Journal,  debiting 

Expense  account  for  the  collection  charge. 
September  18     Closed  Cons.  No.  1,  and  gave  Jos.  Lewin  credit  for  the  net  proceeds.     Deduct 

these  additional  charges:  commission  3%;  boxing,  $4.00;  drayage,  $3.50; 

insurance,  $1.50. 
Note:     All  items  such  as  boxing,  crating,  sacks,  etc.,   should   be  entered  in  an  account 
called  "Boxing  and   Crating." 

September  20    Received  account  sales  from  Walter  Fair  for  shipment  sent  him  September 
6.     He  inclosed  check  for  $275.00,  the  net  proceeds. 


LOCKYEAR'S  BOOKKEEPING  91 

September  21  Paid  sight  draft  on  us  drawn  by  Arthur  Mann,  on  account  of  Consignment 
No.  2,  $150.00. 

September  25  Received  account  sales  from  Mar  win  &  Hart,  account  of  Shipment  No.  2, 
showing  the  net  proceeds  to  be  $248.50.  New  York  draft  was  in- 
closed. 

September  25  Shipped  a  lot  of  goods  valued  at  $290.00  to  C.  E.  King,  Elkhart,  Ind.,  to 
be  sold  on  our  account  and  risk.  Paid  cash  for  hauling  to  the  freight 
house,  $5.80. 

262.  When  the  above  transactions  are  properly  entered,  have  your  work 
verified  by  the  teacher,  after  which  carry  out  the  following  instructions : 

(a)  Post  to  ledger  paper,  opening  accounts  as  required. 

(b)  Take  a  trial  balance. 

(c)  Determine    what    accounts    show    inventories.      (See    Section 

259.) 

(d)  Make  out  a  financial  statement. 

(e)  Close  the  Ledger. 

263.  Answer  the  following  questions  in  writing  and  hand  to  your  teacher: 

(a)  What  is  a  commission  business? 

(b)  What  is  a  shipment? 

(c)  What  is  a  consignment? 

(d)  Why  is  property  on  hand,  belonging  to  a  consignment,   not 

considered  a  resource  when  the  financial  statement  is  made 
out? 

(e)  The  debit  side  of  a  Consignment  account  is  $47.00,  the  credit 

side  is  $253.00.  Make  the  required  Journal  entry  for 
closing  the  account  after  deducting  the  following  charges: 
Commission  2%  ;  boxing  $4.00 ;  insurance  $3.50 ;  storage 
$5.00,  and  remitting  the  proceeds  in  cash. 

Rules  of  Debit  and  Credit 

264.  The  following  summary  of  the  rules  for  debiting  and  crediting  Ship- 
ment and  Consignment  accounts  will  be  convenient  for  reference. 

Shipment  Accounts 

265.  Debit  the  Shipment. 

(a)     For  the  value  of  the  goods   (usually  cost)   at  the  time  they 

were  sent. 
(&)     For  all  expenses  incurred  in  making  the  shipment. 

266.  Credit  the  Shipment. 

(a)  For  all  payments  received  on  account  of  it. 

(b)  For  the  net  proceeds  when  the  account  sales  is  received. 


92  LOCKYEAR'S  BOOKKEEPING 

Consignment  Accounts 

267.  Debit  the  Consignment. 

(a)  For  all  charges  paid  at  the  time  of  receiving  the  goods. 

(b)  For  all  subsequent  charges. 

(c)  For  the  net  proceeds. 

268.  Credit  the  Consignment. 

(a)  For  all  sales  of  goods  belonging  to  it. 

(b)  For  rebates  on  overcharges  previously  debited  to  the  account. 

Opening  Entries 

269.  At  the  commencement  of  business  a  proprietor  often  invests  something 
besides  cash.  He  may  have  various  kinds  of  property  on  hand,  or  debts  due  him, 
either  in  the  form  of  open  accounts  or  promissory  notes.  He  may  also  be  in- 
debted to  others  and  these  liabilities  are  to  be  assumed  by  the  business. 

270.  When  the  proprietor  begins  business  with  resources  and  liabilities,  it 
is  customary  to  make  the  opening  entry  in  the  Journal,  debiting  the  resources 
and  crediting  the  liabilities  and  giving  the  proprietor  credit  for  their  difference. 
This  difference  is  called  the  net  investment. 

271.  The  following  illustration  will  make  this  matter  clear  and  enable  you 
to  make  the  opening  entry  in  similar  cases. 

J.  B.  Carter  begins  business  with  the  following  resources  and  liabilities: 
cash  on  hand,  $2,350;  stock  of  goods  valued  at  $1,200;  office  furniture,  $125; 
bills  receivable  on  hand,  $600.  Due  from  John  James,  $150;  from  Alfred  Peats. 
$260.  He  owes  on  account,  Sanborn  &  Wilder,  S360;  M.  O.  Hansen,  $75.00. 
There  is  one  outstanding  note  for  $490.00  on  which  there  is  six  months'  accrued 
interest  amounting  to  $14.70. 

The  Journal  entry  for  the  above  would  be  made  in  the  following  form : 

Cash    2350.00 

Mdse 1200.00 

Furniture  &  Fixtures 125.00 

John  James   150.00 

Alfred  Peats 260.00 

Bills  Receivable 600.00 

Sanborn  &  Wilder 360.00 

Bills  Payable 490.00 

M.  O.  Hansen    75.00 

Interest  &  Discount    14.70 

/.  B.  Carter,  Net  Inv 3745.30 


LOCKYEAR'S  BOOKKEEPING  93 

Cash  is  checked  (V)  to  indicate  that  it  is  also  entered  on  the  debit  side  of 
the  Cash  Book,  and  therefore  is  not  to  be  posted. 

272.  When  two  or  more  persons  engage  in  business  as  partners,  separate 
opening  entries  should  be  made  for  the  resources  and  liabilities  of  each  partner. 

Exercise  No.  21 

273.  Arrange  the  following  opening  entries  in  Journal  form: 

(a)  Adrian  K.  Lambert  began  business  investing  tbe  following  resources  and  liabili- 
ties: cash  on  hand,  $3,000;  J.  E.  Baker's  90-day  note  for  $870;  accrued  interest  on  Baker's 
note,  $8.70;  Brown  &  Lodrich  owe  him  on  account  $500;  B.  J.  Tanner  owes  him  $240.00. 

His  liabilities  consist  of  a  note  for  $600  in  favor  of  George  Bemis  and  accrued  interest 
on  it  amounting  to  $27.00. 

(b)  Jerome  Vanna  and  Leon  Caxton  commenced  business  as  partners. 

Vanna  invested  the  following:  cash,  $1,390;  merchandise,  $600;  his  personal  note  for 
$300,  and  a  debt  of  $361  due  him  on  account  by  Otis  Bennings. 

He  owes  on  account:     P.  O.  Hogue,  $60;  Mendell  &  Laird,  $125. 

Caxton  invested:  cash,  $260;  merchandise,  $1,457;  K.  B.  Perry  ones  him  on  account 
$430 ;  C.  R.  Vance  owes  him  $650. 

He  owes  Blaine  Thomas  on  a  personal  note,  $250;  accrued  interest  thereon,  $5.00;  he 
owes  Simmons  Bros.,  on  account,  $70. 

Merchandise  Discount 

274.  This  subject  was  mentioned  briefly  in  the  Eighth  Lesson,  Section  132. 
Keeping  a  separate  account  with  merchandise  discount  enables  the  proprietor  to 
determine  the  actual  amount  of  discounts  allowed  to  others  for  paying  bills 
within  the  discount  period,  also  the  amount  that  he  gains  by  discounting  his  own 
purchases. 

275.  When  our  customers  discount  their  bills,  the  net  amount  of  our  sales 
is  reduced;  when  we  discount  our  invoices,  the  net  cost  of  our  purchases  is  re- 
duced. 

The  Merchandise  Discount  account  is  transferred  to  the  Merchandise  account 
before  the  latter  is  closed. 

276.  It  is  a  common  practice  in  business  to  allow  a  discount,  usually  2%, 
for  paying  cash  in  ten  days.  The  person  or  firm  having  capital  enough  to  dis- 
count all  bills  has  a  decided  advantage,  as  such  discounts  constitute  a  big  saving. 
If  the  cash  on  hand  is  not  sufficient  to  discount  a  bill,  it  would  pay  to  borrow 
the  money  on  short  time  notes  in  order  to  save  the  discount. 

277.  An  example  will  show  clearly  the  gain  to  be  derived  from  such  a  loan. 
Suppose  an  invoice  amounting  to  $600.00  is  purchased  on  account  thirty  days, 
or  two  per  cent  discount  for  cash  in  10  days.  Two  per  cent  on  $600.00  is 
$12.00.     It  will  take  $588.00  to  pay  the  invoice.     If  the  proprietor  has  not  this 


94  LOCKYEAR'S    BOOKKEEPING 

sum  on  hand,  he  can  give  the  bank  his  30-day  note  for  such  an  amount  that  when 
discounted,  the  proceeds  will  be  $588.00.  A  note  for  $590.95,  discounted  for  30 
days  at  6%  will  give  $588.00  as  proceeds.  The  difference  between  $12.00,  the 
discount  of  2%  on  the  invoice,  and  $2.95,  the  interest  on  the  loan  of  $588.00,  is 
$9.05.     The  latter  amount  is  gained  by  taking  advantage  of  the  cash  discount. 

Examples  in  Merchandise  Discount 

278.  An  invoice  from  Bowen  &  Co.,  dated  January  3,  1911,  amounting  to 
$937.80,  was  purchased  on  the  following  terms:  60  days,  net;  30  days,  1%;  10 
days,  2%. 

The  above  invoice  will  be  used  as  the  basis  for  several  transactions  illustrating 
the  necessary  entries  to  be  made  by  the  bookkeeper. 

279.  Pay  cash  for  the  invoice,  less  2%  for  paying  within  10  days  from  date. 
The  discount  at  2%,  would  be  $18.76.     Enter  in  the  Cash  Book  and  debit 

Bowen  &  Co.  on  the  credit  side  for  $937.80  and  credit  Merchandise  Discount  on 
the  debit  side  for  $19.76. 

280.  Not  having  the  ready  cash  to  discount  the  invoice,  borrow  at  the  bank 
on  your  30-day  note,  the  exact  amount  required  to  pay  the  invoice,  less  2' ',  . 

After  deducting  the  2%  the  net  amount  is  $919.04.  This  represents  the 
proceeds  to  be  derived  from  a  30-day  note  when  discounted  at  6%  .  The  face  of 
such  a  note  will  be  $923.66. 

The  Cash  Book  entry  for  the  transaction  will  be  as  follows :  credit  Bills 
Payable  on  the  debit  side  for  $923.66,  and  debit  Interest  and  Discount  on  the 
credit  side  for  $4.62. 

You  would  next  issue  your  check  to  Bowen  &  Co.  for  $919.04  and  make  the 
following  entry  in  the  Cash  Book :  on  the  credit  side,  debit  Bowen  &  Co.  for 
$937.80  and  on  the  debit  side,  credit  Merchandise  Discount  for  $18.76.  By 
taking  advantage  of  the  cash  discount  you  have  gained  $14.14  by  borrowing  the 
money. 

281.  Assuming  that  you  had  $600.00  cash  on  hand  which  you  could  apply 
as  a  part  payment  on  the  invoice  within  the  10-day  discount  period,  you  would  be 
entitled  to  a  credit  of  such  a  sum,  which,  if  discounted  at  2%,  would  give  $600.00, 
net.  Every  dollar  of  an  invoice,  subject  to  2%  discount,  will  be  canceled  by  a 
payment  of  98  cents.  Therefore,  a  payment  of  $600.00  will  cancel  a  debt  of  as 
many  dollars  as  98  cents  is  contained  in  $600.00,  or  $612.24.  The  proof  of  this 
is  found  by  deducting  2%  from  $612.24,  which  leaves  $600.00. 

The  Cash  Book  entry  for  the  above  would  be  as  follows :  Debit  Bowen  &  Co. 
on  the  credit  side  for  $612.24,  and  credit  Merchandise  Discount  on  the  debit  side 
for  $12.24. 


LOCKYEAR'S  BOOKKEEPING  95 

282.     Answer  the  following  questions  in  writing  and  hand  to  your  teacher : 

(a)  What  is  Merchandise  Discount? 

(b)  What  advantage  is  derived  from  keeping  a  Merchandise  Dis- 

count account? 

(c)  How  would  this  account  he  disposed  of  when  the  hooks  are 

closed  for  the  year? 

(d)  In  the  example  given  in   Section  281,  why  would  it  not  be 

correct  to  deduct  2%  from  $600.00  and  then  debit  Bowen  & 
Co.  for  $612.00?  Explain  as  fully  as  possible  the  reason 
for  your  answer. 

(e)  What  is  the  difference,  if  any,  between  an  invoice  and  a  bill? 


Sixteenth  Lesson 


Commercial  Paper  and  General  Review 

283.  By  maturity  of  a  note,  is  meant  the  day  upon  which  it  is  due  and 
payable. 

284.  When  a  commercial  paper  is  payable  a  given  number  of  days  from 
date,  count  ahead  the  exact  number  of  days  in  finding  the  due  date ;  when  payable 
a  given  number  of  months  after  date,  calendar  months  are  counted. 

285.  If  the  day  of  maturity  falls  upon  a  Sunday  or  a  legal  holiday,  the  note 
is  legally  due  on  the  next  business  day  according  to  the  laws  of  most  states. 

Examples  in  Finding  Date  of  Maturity 

286.  A  note  dated  December  31,  1911,  and  payable  thirty  days  from  date 
would  be  due  January  30,  1912.  If  payable  one  month  from  date,  it  would  be 
due  January  31.  If  payable  sixty  days  from  date,  it  would  be  due  February  29. 
If  payable  two  months  from  date,  it  would  be  due  February  29. 

A  note  or  time  draft  dated  March  18,  1911,  if  payable  in  ninety  days  would 
be  due  June  16,  1911.  If  payable  in  three  months,  the  date  of  maturity  would 
be  June  18,  1911. 

Exercise  No.  22 

287.  Below  are  given  the  dates  of  several  notes;  also  the  time  they  have  to 
run.     Find  the  dates  of  maturity  and  hand  to  the  teacher  for  verification. 

Date  of  Note  Time  to  run. 

April  7,  1911 3  Days 

July  31,  1909 60  Days 

July  1,   1911 3  Months 

July  1,   1911 90  Days 

January   28,    1911 1  Month 

January  28,    1911 30  Days 

April  29,   1910 1  Month 

May  31,  1911 1  Month 

June   17,   1911 45  Days 

October  25,  1910 90  Days 

96 


LOCKYEAR'S    BOOKKEEPING  97 

Discounting  Promissory  Notes 

288.  The  advantage  of  a  promissory  note  over  an  open  account  is  that 
the  note  may  be  discounted  and  money  realized  on  it  before  it  is  due. 

Banks  will  discount  commercial  paper  where  the  parties  are  known  to  be 
responsible,  or  where  satisfactory  collateral  security  is  given. 

289.  By  collateral  security  is  meant  corporate  stocks,  negotiable  instruments 
and  other  written  obligations  which  are  deposited  as  a  pledge  to  secure  the  pay- 
ment of  a  debt. 

290.  Promissory  notes  are  also  transfered  in  the  regular  course  of  busi- 
ness in  settlement  of  account. 

When  notes  are  transferred  from  one  party  to  another  as  a  payment,  the 
present  value  of  the  note  constitutes  the  amount  to  be  applied  on  account. 

291.  The  present  value  of  a  note  is  the  amount  which  would  be  due  at 
maturity,  less  the  interest  on  this  amount  for  the  actual  number  of  days  from 
the  day  it  is  transferred  or  discounted  to  the  day  of  maturity. 

The  amount  due  at  maturity  is  the  face  of  the  note  and  the  interest  for  the 
whole  time,  if  the  note  bears  interest. 

The  rate  of  discount  is  fixed  by  the  parties,  and  is  usually  that  at  which  money 
is  loaned  at  the  time  of  the  transaction. 

292.  There  is  a  difference  between  discounting  another's  promissory  note 
and  one's  own  written  promise  to  pay.  Another's  promissory  note  is  considered, 
in  law,  as  personal  property,  and  therefore  may  be  sold  at  any  price  that  the 
parties  may  agree  upon,  the  same  as  any  other  chattel.  When  a  person  discounts 
his  own  promissory  note,  it  is  done  for  the  purpose  of  raising  funds.  This  is  a 
loan  of  money,  hence  the  law  only  allows  the  legal  rate  of  discount. 

Examples  in  Discounting  and  Transferring  Commercial  Paper 

293.  The  following  promissory  note  will  form  the  basis  for  two  trans- 
actions involving  bank  discount  with  the  proper  entries  in  the  books. 

$672.90.  St.  Paul,  Minn.,  May  3,  1911. 

Two  months  after  date,  I  promise  to  pay  to  the  order  of  James  Buchanan,  Six  Hundred 
Seventy-two  and  90/100  Dollars.     Value  received. 

ALBERT  LUTRELLE. 

294.  James  Buchanan  having  received' the  above  note  and  wishing  to  realize 
on  it  without  waiting  until  July  3,  the  day  it  is  due,  has  the  note  discounted  at 
the  bank  at  6%,  on  May  31.  The  actual  number  of  days  from  May  31  to  July  3 
is  33.  The  discount  is  the  interest  on  $672.90  for  33  days  at  6%,  or  $3.70.  By 
this  transaction  the  bank  makes  $3.70  for  advancing  $669.20  on  the  note.  In 
other  words,  James  Buchanan  pays  $3.70  interest  for  the  use  of  $669.20  for  33 
days. 


98  LOCKYEAR'S  BOOKKEEPING 

James  Buchanan  would  enter  this  transaction  in  his  Cash  Book.  On  the 
debit  side,  Bills  Receivable  account  would  be  credited  for  the  face  of  the  note, 
$672.90,  and  on  the  credit  side,  Interest  and  Discount  account  would  be  debited 
for  $3.70.  The  difference  between  these  two  entries  represents  the  actual  amount 
of  cash  received  from  discounting  the  note. 

295.  The  promissory  note  given  below  illustrates  a  transaction  in  which  an 
interest  bearing  note  is  discounted. 

$983.75.  Rochester,  N.  Y.,  March  4,  1911. 

Ninety  days  from  date  I  promise  to  pay  Charles  Brown,  or  order,  Nine  Hundred  Eighty- 
three  and  75/100  Dollars,  with  interest  at  8%  per  annum. 

D.  E.  MEYERS. 

296.  Charles  Brown  discounted  the  above  note  at  the  bank  on  April  16,  at 
the  rate  of  6%. 

The  interest  on  $983.75  for  the  whole  time,  ninety  days,  is  $19.67.  The 
amount  to  be  discounted  is  the  sum  of  the  face  and  the  interest,  or  $1,003.42. 
The  note  is  due  June  2.  The  time  from  April  16  to  June  2  is  47  days.  The 
interest  on  $1,003.42  for  47  days,  at  6%,  is  $7.86.  The  proceeds,  or  amount 
realized,  is  the  difference  between  $1,003.42  and  $7.86,  or  $995.56. 

This  transaction  will  require  two  entries  on  the  debit  side  of  the  Cash  Book 
and  one  on  the  credit  side.  The  first  entry  on  the  debit  side  would  be  "Bills 
Receivable,  Dis.,  at  bank,  D.  E.  Meyers'  note,  $983.75."  The  second  entry  would 
be  "Int.  &  Dis.,  90  ds.,  Int.  on  above  at  8%,  $19.67."  On  the  credit  side  of  the 
Cash  Book  you  would  write,  "Int.  &  Dis.,  47  ds.,  Dis.,  at  6%  on  Meyers' 
note,  $7.86." 

297.  Let  us  assume  that  James  Buchanan  transferred  the  note  in  Section 
293  to  Samuel  Warren  to  apply  on  account. 

The  note  will  not  be  worth  its  face  value  until  July  3.  Therefore,  Samuel 
Warren  should  be  debited  only  with  the  present  value  (see  Section  291)  of  the 
note,  and  we  have  found  that  to  be  $669.20. 

James  Buchanan  would  enter  this  transaction  in  the  Journal  by  debiting 
Samuel  Warren  for  $669.20,  Interest  and  Discount  for  $3.70,  and  crediting  Bills 
Receivable  for  $672.90. 

298.  If  the  promissory  note  in  Section  295  had  been  transferred  by  Charles 
Brown  to  Dillard  &  Garrick  to  apply  on  account  on  the  day  it  was  discounted  at 
the  bank,  then  the  following  entries  would  be  made  in  the  Journal  by  the  book- 
keeper for  Charles  Brown : 

Dillard  &  Garrick $995.56 

Discount 7.86 

Bills  Receivable $983.75 

Interest   19.67 


LOCKYEAR'S  BOOKKEEPING  99 

You  will  observe  that  Dillard  &  Garrick  are  debited  with  the  cash  value  of 
the  note  at  the  time  it  was  transferred  to  them. 

229.     Answer  the  following  questions  in  writing  and  hand  to  your  teacher : 

(a)  Did  Charles  Brown  lose  by  the  transaction?     If  so,  how  much? 

(b)  Assuming  that  Dillard  &  Garrick  held  the  note  until  it  was 

due,  would  they  gain  or  lose,  and  how  much? 

(c)  In  interest  bearing  notes,  why  is  the  interest  for  the  whole 

time  added  to  the  face  before  discounting? 

(d)  Why  should  the  person  receiving  a  note  on  account  before  it 

is  due  be  debited  with  the  proceeds  only? 

(e)  Write  the  Journal  entry  Dillard  &  Garrick  would  make  when 

they   receive   the   note   from   Charles   Brown   to   apply   on 
account. 

Drafts  and  Their  Use 

300.  The  definition  of  a  draft  was  given  in  the  Sixth  Lesson,  Section  76. 
With  reference  to  time  of  payment,  drafts  are  either  sight  or  time  drafts.  A 
sight  draft  is  one  payable  upon  presentation.  Time  drafts  are  payable  after 
sight  or  after  date.  In  the  former  the  time  runs  from  the  date  of  acceptance, 
and  in  the  latter  from  the  date  of  the  draft. 

301.  Sight  drafts  are  treated  as  cash  by  the  person  receiving  them.  Refer 
to  Illustration  No.  14  for  the  form  of  an  acceptance,  also  read  Section  79. 

302.  By  means  of  a  draft  it  is  possible  for  parties  living  in  places  distant 
from  each  other  to  cancel  an  indebtedness  without  sending  the  cash.  To  illus- 
trate: A  in  Chicago,  owes  B  in  San  Francisco,  $100.00,  and  C  in  San  Francisco, 
owes  A  a  like  amount.  A  can  draw  a  draft  on  C  ordering  him  to  pay  B  $100.00, 
and  then  send  the  draft  to  B.  When  B  receives  the  draft  from  A,  he  presents 
it  to  C  for  payment.  You  will  observe  that  when  C  pays  the  draft  two  debts 
have  been  canceled  without  sending  money  back  and  forth  from  Chicago  to  San 
Francisco. 

303.  Personal  drafts  originated  in  the  early  days  of  commerce  when  it  was 
extremely  risky  for  business  men  going  to  far  away  countries  to  carry  money 
with  them,  owing  to  the  prevalence  of  bands  of  robbers  on  the  highways  and 
pirates  on  the  seas.  With  the  establishment  of  banks,  postoffices  and  other 
financial  agencies  in  all  parts  of  the  world,  methods  of  transmitting  money  have 
been  changed  until  now  the  personal  draft  is  rarely  used  as  a  means  of  paying 
a  debt. 

304.  A  check  is  a  written  order  upon  a  bank  or  banker  directing  the  pay- 
ment of  a  certain  sum  of  money,  on  demand,  to  a  third  party.     Aside  from  its 


100  LOCKYEAR'S    BOOKKEEPING 

form,  a  check  differs  from  a  sight  draft  mainly  in  that  it  is  drawn  upon  a  bank, 
whereas  the  drawee  in  a  sight  draft  is  an  individual  or  a  firm. 

305.  A  bank  draft  is  a  written  order  of  one  bank  directing  another  bank 
to  pay  to  a  third  party,  or  order,  a  certain  sum  of  money  on  demand. 

All  banks  have  money  on  deposit  in  the  nearest  financial  center  against  which 
they  issue  drafts.  Nearly  all  banks  have  money  on  deposit  in  New  York  and 
Chicago.  Drafts  on  these  cities  are  payable  at  face  value  in  all  parts  of  the 
United  States. 

306.  A  bank  draft  forms  a  convenient  and  inexpensive  method  of  re- 
mitting money.  The  draft  is  usually  made  payable  to  the  purchaser  who  in- 
dorses it  in  full  before  sending  it  to  the  person  who  is  to  receive  the  money. 

307.  A  charge  known  as  exchange  may  be  made  by  the  bank  for  issuing  a 
draft. 

308.  Sight  drafts  are  most  commonly  used  for  collection  purposes.  A  in 
Chicago  has  $100.00  due  him  from  B  in  Denver.  A  may  draw  a  sight  draft  in 
his  own  favor  on  B  for  this  amount,  and  after  indorsing  it,  leave  it  at  his  bank 
for  collection.  This  means  that  A's  bank  in  Chicago  will  forward  the  draft  to 
its  correspondent  bank  in  Denver.  The  Denver  bank  will  present  the  draft  to  B 
for  payment.  If  paid,  it  will  remit  the  $100.00,  less  a  small  charge  for  the  service, 
to  the  Chicago  bank  who  will  notify  its  customer,  A,  that  the  draft  has  been 
collected  and  the  amount  placed  to  his  credit. 

In  case  B  refuses  payment  the  draft  would  go  to  protest,  and  a  business 
man  who  values  his  credit  standing  will  pay  the  draft  rather  than  let  it  be  pro- 
tested. 

309.  By  protest  is  meant  the  presentation  of  the  draft  by  a  Notary  Fublic 
to  the  drawee  for  payment.  The  purpose  of  a  protest  is  to  furnish  legal  evidence 
of  the  fact  of  presentation  within  the  proper  time.  The  notary  makes  out  a 
formal  statement  called  the  Protest  which  is  sent  to  the  holder  of  the  paper.  He 
also  sends  notice  of  the  protest  to  all  parties  to  whom  the  holder  may  look  for 
payment. 

310.  The  charge  made  by  a  bank  for  collecting  a  sum  of  money  is  called 
"Collection." 

311.  If  it  is  desired  to  know  how  much  is  paid  for  collection  and  exchange 
items,  an  account  may  be  opened  under  the  title  of  "Collection  and  Exchange." 

312.  Indorsement  as  applied  to  commercial  paper  means  writing  one's  name 
on  the  back  of  the  paper  with  the  intent  to  incur  a  liability  under  certain  condi- 
tions. There  are  several  kinds  of  indorsement,  but  only  the  ones  most  frequently 
used  will  be  defined  here. 


LOCK  YEAR'S    BOOKKEEPING  101 

313.  A  full  indorsement  is  one  in  which  the  party  transferring  the  paper 
writes  the  words  "Pay  to  the  order  of"  and  then  names  the  person  to  whom  the 
transfer  is  made  and  signs  his  own  name.  The  effect  of  such  an  indorsement  is 
that  only  the  indorsee  (the  party  to  whom  transferred)  has  a  legal  title,  and  in 
order  to  sell  the  paper  he  must  indorse  it  again  either  in  full  or  in  blank. 

314.  A  blank  indorsement  is  simply  writing  one's  name  on  the  back.  The 
effect  is  that  thereafter  the  paper  is  payable  to  the  bearer,  that  is,  whoever  has 
possession  of  it. 

315.  An  indorscr  of  commercial  paper  makes  himself  liable  for  payment, 
in  case  the  paper  is  not  paid  when  due,  or  if  for  any  other  reason  it  is  "No  Good." 

Exercise  No.  23 

316.  Write  the  answers  and  prepare  the  work  called  for  in  the  following 
exercises  and  hand  to  the  teacher  for  examination : 

(a)  Write  a  draft  on  Jones  &  Martin,  Elgin,  111.,  in  favor  of  C.  J.  Linden,  payable  30 
days  after  sight,  for  $392.65.     Use  the  current  date. 

(&)  Write  across  the  face  of  the  draft  Jones  &  Martin's  acceptance  made  four  days 
later. 

(c)  A.  D.  Howe  in  Buffalo  owes  M.  W.  Miller  in  Chicago  $430  and  the  account  is 
considerably  past  due.     Prepare  for  Miller  the  proper  draft  for  collection  through  his  bank. 

(d)  What  is  the  difference  between  a  draft  payable  5  days  after  date  and  one  payable 
5  days  after  sight? 

(e)  Write  the  journal  entries  which  would  be  made  for  the  draft  in  exercise  (a)  : 
(1)  by  the  drawer;  (2)  by  the  drawees  when  they  accepted  it;  (3)  by  the  payee  when  he 
received  the  draft. 

(/)  C.  K.  Linden  wishes  to  give  Jones  &  Martin's  acceptance  to  William  S.  Wall  to 
apply  on  account.     Write  the  full  indorsement  necessary  to  make  the  transfer. 

(g)  What  is  a  blank  indorsement? 

(li)  What  liability,  if  any  attaches  to  the  signing  of  your  name  on  the  back  of  a  note, 

draft  or  any  other  negotiable  paper? 

(i)  What  is  the  day  of  maturity  in  Jones  &  Martin's  acceptance  referred  to  in  (&) 
above  ? 

(/)  If  the  above  draft  had  been  drawn  at  30  days  from  date,  when  would  it  be  due? 

Exercise  No.  24 

317.  In  this  exercise  the  student  takes  charge  of  a  set  of  books  already 
opened.  It  is  assumed  that  the  books  were  closed  December  31,  and  that  new 
ledgers  are  to  be  opened  for  the  accounts  shown  by  the  last  trial  balance. 

The  business  is  conducted  as  a  partnership ;  each  partner  having  a  one-half 
interest  and  sharing  equally  in  the  losses  and  gains.  The  partners  are  Eugene 
Gardner  and  David  Lange.  The  books  used  are  the  Journal,  Sales  Book,  Pur- 
chase Book,  Cash  Book,  a  General  and  an  Accounts  Receivable  ledger. 


102  LO-CKYEAR'S  BOOKKEEPING 

The  articles  handled  represent  the  hardware  business  and  will  be  bought  and 
sold  in  wholesale  quantities. 

318.  Open  the  General  ledger  by  entering  the  accounts  given  in  the  trial 
balance.  Give  each  account  one-third  of  a  page,  and  open  them  in  the  order  in 
which  they  are  found  in  the  trial  balance.  The  cash  balance  will  be  entered  later 
in  the  cash  book. 

TRIAL   BALANCE,   GARDNER    &   LANGE,   DEC.    31,    19 

Eugene  Gardner  $7,146.24 

David  Lange   7,146.23 

Bills  Receivable  $     897.50 

Bills  Payable  1,465  75 

Accounts  Receivable   5,283.40 

Brown,  Lee  &  Co 1,962.70 

Morton  Hardware  Co 848.50 

Edwin  Barger  472.75 

Lemont  &  Ganey 736.08 

Chas.  Herring  491.00 

Merchandise    8,549.75 

Furniture  and  Fixtures 1,240.00 

Cash  4,298.60 


$20,269.25  $20,269.25 

319.  Open  accounts  in  the  Accounts  Receivable  ledger  with  the  following 
personal  accounts  due  the  firm,  entering  three  on  each  page :  Jackson,  Ward  &  Co., 
$378.90;  J.  B.  Mansfield,  $243.00;  A.  W.  Quinn,  $682.58;  A.  R.  Mangold, 
$872.15;  Bloom  &  Berger,  $387.90;  Simonton  Hardware  Co.,  $140.86;  Maxwell 
Hardware  Co.,  $1783.97;  B.  K.  Terry,  $116.80;  E.  E.  Hunt,  $456.14;  Edmund  S. 
Hewitt,  $221.10. 

320.  Prepare  the  Cash  Book  by  ruling  an  extra  money  column  on  the  debit 
side.  Head  each  column  as  follows:  first  column,  "Mdse.  Dis.,"  second  column, 
"Accts.  Rec,"  third  column,  "General."  The  first  column  will  receive  all  entries 
for  merchandise  discount  allowed  to  us.  The  second  column  is  for  money  re- 
ceived on  account  from  our  customers.  The  third  column  is  for  all  other  cash 
receipts. 

321.  The  first  column  on  the  credit  side  will  be  headed  Merchandise  Dis- 
count, and  will  receive  the  entries  for  discounts  allowed  to  others.  The  second 
column  is  for  all  other  payments  of  cash. 

Open  your  Cash  Book  by  entering  the  cash  balance  in  the  General  column 
on  the  debit  side. 

322.  If  you  have  carefully  followed  the  directions  given  above,  you  are  now 
ready  to  proceed  with  the  regular  business  transactions. 


LOCKYKAR'S    HOOKKKEPING 


103 


January     3 


Hardware  Transactions 

Paid  telephone  bill  for  month,  $15.70. 


Received  New  York  draft  from  A.  W.  Quinn  in  full  of  account,  less  2%. 
Received  30-day  note,  dated  December  30,  interest  6%,  from  E.  E.  Hunt,  to 

balance  account. 
Received  invoice  of  goods  from  the  Baird  Tool    Co.,  $980.40.     Terms,  60  days; 

2%,  30  days;  3%,  10  days. 
Paid  cash  for  postage,  $35.00. 
January    4      Sold  to  Armstrong  &  Co.,  Clinton,  Iowa,  on  account  60  days,  2%  in  10  days : 

10  doz.  Hatchets  at  $5.50  a  doz. ;  2  doz.  Drawing  Knives  at  $9.00  a  doz. ;  20 

doz.  Rules  at  $1.70  a  doz.;  5  Heating  Stoves  at  $15.00  ea. ;  5  Steel  Ranges  at 

$47.50  ea. 
Paid  cash  for  20  tons  coal  at  $4.00  a  ton,  for  furnace  use. 
Sold  to  A.  R.  Mangold,  Batavia,  111.,  and  received  in  payment  his  60-day  note 

with  interest  at  7%:  12  Refrigerators  at  $24.75  ea. ;  15  Heating  Stoves  at 

$15.00  ea. 

Note:     Make  two  entries  for  this  and  similar  transactions  as  explained  in  Section  213. 

Bought  from   Chas.   Herring,  and  gave  our  30-day  note   in   payment,  invoice 

amounting  to  $607.00. 
January     5      Paid  cash  for  outstanding  note,  favor  of  Lennox  &  Co.,  $703.25. 

Sold  to  B.  K.  Terry  on  account:     30  doz.  Screwdrivers  at  $1.05  a  doz.;   5  doz. 

Clothes  Wringers  at  $57.00  a  doz.     With  his  order  he  inclosed  check  for 

$116.80  to  balance  his  old  account. 
Sold  to  G.  S.  Lathrop,  Elgin,  111.,  30  days  net,  2%  10  days:     10  doz.  Hand  Saws 

at  $25.00  a  doz.;  20  doz.  Hammers  at  $6.20  a  doz.;  10  doz.  Rules  at  $1.70 

a  doz. ;  5  Refrigerators  at  $24.75  ea. 
Sold  to  Edmund  S.  Hewitt,  and  received  cash,  $200.00,  balance  on  account,  30 

days:     8  Steel  Ranges  at  $47.50  ea. ;  20  Heating  Stoves  at  $15.00  ea.     A 

special  discount  of  3%  was  allowed  from  the  whole  bill. 
January     6      Gave  Morton  Hardware  Co.  check  for  balance  of  their  account,  $848.50,  less  2%. 
Gave  Brown,  Lee  &  Co.,  10-day  note,  with  interest,   for  $962.70,  to  apply  on 

account. 
Sold  to  J.  B.  Savage,  Aurora,  111.,  2  doz.  Clothes  Wringers  at  $57.00  a  doz. ; 

10  doz.  Hatchets  at  $5.50  a  doz.;  5  doz.  Drawing  Knives  at  $9.00  a  doz.; 

6    Steel    Ranges    at   $47.50   ea.     A    special    discount    of    5%    was    allowed. 

Received  in  payment  his  30-day  note   for  $240.00,  bearing  interest  at  6%, 

and  cash  for  the  balance. 
Bought  from  Edwin  Barger  invoice  amounting  to  $800.00,  and  gave  check  for 

$350  to  apply  on  account. 
January     7      Gave  Lemont  &  Ganey,  to  apply  on  account,  note  for  $360.00,  due  February  6, 

less  discount  at  6%  for  the  unexpired  time.     For  explanation  of  this  trans- 
action see  Section  297. 
January     9      Paid  cash  for  sundry  freight  bills,  $27.00. 
January  12     The  Maxwell  Hardware  Co.  gave  us  J.  B.  Scott's  60-day  note  for  $976.50,  due 

February  28,  less  the  discount  at  6%  for  the  unexpired  time. 
Sold  to  A.  W.  Quinn  on  account :     4  doz.  Hand  Saws  at  $25.00  a  doz. ;  5  doz. 

Hammers  at  $6.20  a  doz. 


104 


LOCKYEAR'S  BOOKKEEPING 


January  13  Paid  Baird  Tool  Co.,  cash  for  invoice  of  the  3d  inst.,  less  3%. 
January  14  Sold  to  Mayer  Bros.,  on  account,  10  Steel  Ranges  at  $47.50  ea. 
January  16      Paid  our  note,  with  interest,  given  to  Brown,  Lee  &  Co.,  on  the  6th. 

Sold  to  Simonton  Hardware  Co.,  subject  to  sight  draft  in  three  days :     10  doz. 
Hatchets  at  $5.50  a  doz.;  20  Heating  Stoves  at  $15.00  ea. 
January  17      Received  New  York  draft  from  Armstrong  &  Co.    for  bill  of  the  4th  inst., 
less  2% 
Gave  cash  to  bank  for  sight  draft  drawn  on  us  by  Edwin  Barger  for  balance 

of  his  account,  January  2,  $472.75,  less  2%. 
Received  invoice  amounting  to  $165.00  from  Morton  Hardware  Co. 
Received  invoice,  $649.50,  from  Lemont  &  Ganey,  on  account  30  days;  2%  in  10 
days. 
18      Bought  four  horses  and  two  delivery  wagons,  paying  cash,  $980.00. 
Note:     Open  an  account  with  "Horse  and  Wagon." 


January 
January 


19     Insured  stock  of  goods  and  other  personal  property  for  $10,000  and  paid  the 
premium  of  V/2%  in  cash.     Open  an  account  with  "Insurance." 
Received  cash  from  J.  B.  Mansfield  in  full  of  account. 
Sold   to   Walter    Spry,   on   account :      20   doz.    Screwdrivers    at   $1.05   a   doz. ; 

3  Refrigerators  at  $24.75  ea. ;  5  Steel  Ranges  at  $47.50  ea. 
Drew  sight  draft  on  Simonton  Hardware  Co.,  for  bill  of  January  16,  and  left 
at  bank  for  collection. 
January  20     Discounted  at  bank,  at  6%,  A.  R.  Mangold's  note  for  $522.00  received  on  the 
4th.     Remember  that  the  note  bears  interest  at  7%.     The  bank  credits  our 
account  for  the  proceeds,  which  is  the  same  as  receiving  cash. 
January  21      Paid  our  note  for  $862.50,  with  90  days'  interest  at  6%. 

Received  cash  from  Mayer  Bros,  for  bill  of  the  14th,  less  2%. 
January  24      Paid  cash,  $156,  to  pay  a  personal  bill  against  David  Lange. 
January  26      Sold  to  G.  S.  Lathrop,  5  doz.  Hand  Saws  at  $25.00  a  doz.,  10  doz.  Hammers 
at  $6.20  a  doz.     Received  from  him  $75  cash,  balance  on  account,  30  days. 
Having  more  coal  than  we  will  need,  we  have  sold  for  cash  5  tons  at  $5  a  ton. 
January  28     Our  bank  notifies  us  that  the  sight  draft  on  the  Simonton  Hardware  Co.  has 
been  collected  and  the  amount,  less  60c,  placed  to  our  credit.     Make  the 
proper  entries,  debiting  Expense  account  with  the  charge  for  collection. 
Paid  cash  for  adding  machine,  $250. 
January  30      Paid  cash,  $25,  for  hay  and  feed  for  horses.     Debit  "Horse  and  wagon"  account 
for  this. 
Received  cash  from  Bloom  &  Berger  in  full  of  account. 

Gave  Lemont  &  Ganey  $500  cash  to  apply  on  invoice  of  January  17.  Remember 
that  this  payment  will  entitle  us  to  a  credit  of  more  than  $500.  For  an 
explanation  of  this  transaction  see  Section  281. 

323.     Directions  for  completing  the  exercise: 

(a)  Have    all    the    entries    in    the    various    books    verified    before 

posting. 

(b)  Post  from  the  Purchase  Book,  Sales  Book,  Cash  Book  and 

Journal  in  the  order  named. 


LOCK  YEAR'S  BOOKKEEPING  105 

( 1 )  The  total  of  the  sales  column  in  the  Sales  Book- 

will  be  debited  to  the  Accounts  Receivable  account 
and  credited  to  the  Meichandise  account  in  the 
General  ledger.  Each  person  to  whom  goods 
were  sold  will  be  debited  in  the  Accounts  Re- 
ceivable ledger. 

(2)  Prepare  the  Cash   Book   for   balancing  by   footing 

each  column  in  pencil.  Draw  a  single  red  line 
across  the  special  columns.  In  the  explanation 
column  on  the  debit  side  write,  Accts.  Rec,  and 
Mdse.  Dis.  and  enter  the  footings  of  these 
columns  in  the  General  column.  On  the  credit 
side  write  Mdse.  Dis.  and  enter  the  footing  of 
that  column  in  the  General  column.  The  Cash 
Book  is  now  ready  to  balance  as  shown  in  Illus- 
tration No.  34,  Twelfth  Lesson. 

(c)  Take  a  trial  balance  of  the  General  ledger. 

(d)  The  inventories  are  as  follows: 

(1)  Merchandise $8652.25 

(2)  Furniture  and  Fixtures 1475.00 

(3)  Insurance,  unexpired    137.50 

(4)  Horse  and  Wagon 960.00 

(5)  Expense,  unused  coal 48.00 

(e)  Close  the  ledger.     The  Merchandise  Discount  account  should 

be  closed  into  the  Merchandise  account  before  the  latter  is 

closed  to  the  Loss  &  Gain  account. 
(/)      Prove  the  correctness  of  the  Accounts  Receivable  account  by 

taking  an  abstract  of  the  Accounts  Receivable  ledger. 
(g)     Take  a  second  trial  balance. 
(h)     Hand  all  your  books  to  the  teacher  for  examination. 

324.     Answer  the  following  questions  in  writing  and  hand  to  your  teacher : 

(a)  Name  several  accounts  with  property  that  you  have  studied. 

(b)  Name  at  least  three  Speculative  accounts  which  you  have  had 

in  your  work. 

(c)  What  two  ways  are  there  for  finding  the  proprietor's  present 

worth  ? 

(d)  What  facts  about  the  business  are  shown  by  the  Statement? 

(e)  What   is    the    fundamental    principle   of    double    entry    book- 

keeping ? 


THIS  BOOK  IS  DUE  ON  THE  LAST  DATE 
STAMPED  BELOW 

AN  INITIAL  FINE  OF  25  CENTS 

WILL   BE   ASSESSED    FOR    FAILURE  TO    RETURN 
THIS    BOOK    ON    THE    DATE   DUE.    THE   PENALTY 
WILL  INCREASE  TO  SO  CENTS  ON  THE  FOURTH 
DAY    AND    TO    $1.00    ON    THE    SEVENTH     DAY 
OVERDUE. 

rtAT  ox.lQ'VZ 

OCl  <<£«->  i73° 

- 

LD  21-96*n-7,,87 

YLJ  23700 


/ 


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UNIVERSITY  OF  CALIFORNIA  LIBRARY 


